Not Yet.

If you are tempted to buy this premarket bounce at the open, take a breath. Not yet. Commentators, albeit without any hard facts, are raising the spectre of selling forced by margin calls. There’s no proof yet, but we wouldn’t generally expect to get solid reports for a day or two or three. What we can say is that sectors not attached to the AI space fell yesterday, calling to mind the unfortunate mechanics of forced selling. When meeting margin calls, traders will sometimes reach for liquidity in their quality names rather than flushing their ailing tech at the market bottom. This habit, of course, can aggravate the problem if the tech continues to fall. It means more selling of quality until either the tech reverses or the trader cries uncle on the tech commitments.

Again, there aren’t any confirmed reports of this phenomenon taking place, but all major market sectors were down yesterday. Oil names (COP, XOM, CVX) fell despite WTI crude rising $3. If troubled traders were reaching for liquidity from their non-AI names, it would look a lot like this.

To paraphrase again Jesse Livermore, the famous, ill-fated Depression era trader, don’t expect to catch the bottom tick. Wait for the turn and use the new lows as support stops. We’ll learn a lot by watching reaction to the open. Futures are up, and tech is bouncing. If we get selling pressure right away, it will add weight to the margin call thesis. If we can survive the day in positive territory, game on. In that case, we will be updating our trading board in the afternoon, probably towards the last hour of the session.