On Friday, shares of Nvidia fell 4% and chipmakers dragged the Nasdaq to its lowest in the three weeks.

One reason for the sell-off was a Goldman Sachs note from Peter Oppenheimer arguing that traffic to ChatGPT was plunging. Goldman published this chart, which was later widely circulated (including in the Financial Times). It showed the number of visits to ChatGPT:

The chart was further picked up by the usual suspects who argued that ChatGPT is a gimmick, that Meta/Grok/Anthropic is eating its lunch, that it went woke or whatever other agenda they were pushing.

The truth is embarrassingly simple.

The URL of ChatGPT was changed to chatgpt.com from chat.openai.com.

When you overlay both URLs, here is the traffic:

If anything, traffic has been accelerating.

For ‚the smartest guys in the room‘ this reflects a humiliating lack of critical thought. There was no way that ChatGPT usage ever dropped by +80% in just two months.

Did this mistake wipe out $110 billion from Nvidia’s market cap on Friday (for reference, that’s 72% of Goldman’s market cap)?

I doubt it was the main catalyst but I have no doubt that it hurt. Research and critical thinking are in short supply in this meme-driven world.

As for what does worry me about Nvidia, it’s the lifecycle of the investment boom. The H100 chip is one of the all-time great products and demand for it is stratospheric. By all accounts, that demand will be at least equal for Blackwell, the generation coming late this year.

But analysts are pricing in that level of demand — and growing — every year. That has the forward P/E at 37x for 2025.

The first problem is they need to keep iterating to expand their moat, and that’s tough to do with margins near 80%. Now I wouldn’t bet against them on that, but the amount of money going into chipmaking right now is extraordinary and it’s basically a bet against capitalism.

Secondly, there needs to be a return on investment from the buyers. Right now we have all of megacap tech pouring money into chips but at some point those investments need to deliver returns. Right now we’re pricing in that level of investment year after year and I find it hard to believe that all of those companies will continue spending that much in a tech world that trends towards winner-take-all.

Thirdly, comments from Broadcom CEO Hock Tan on Thursday after earnings point to a major threat to Nvidia demand from those same megacap tech companies:

„I used to think that general-purpose merchant silicon will win at the end of the day. Well, based on history of semiconductors mostly so far, general purpose, small merchant silicon tends to win. But like you, I flipped in my view. And I did that, by the way, last quarter, maybe even 6 months ago. But nonetheless, catching up is good. And I actually think so because I do think there are 2 markets here on AI accelerators. There’s one market for enterprises of the world, and none of these enterprises are incapable nor have the financial resources or interest to create the silicon, the custom silicon, nor the large language models and the software going maybe, to be able to run those AI workloads on custom silicon. It’s too much and there’s no return for them to do it because it’s just too expensive to do it. But there are those few cloud guys, hyperscalers with the scale of the platform and the financial wherewithal for them to make it totally rational, economically rational, to create their own custom accelerators because right now, I’m not trying to overemphasize it, it’s all about compute engines. It’s all about especially training those large language models and enabling it on your platform. It’s all about constraint, to a large part, about GPUs. Seriously, it came to a point where GPUs are more important than engineers, these hyperscalers in terms of how they think. Those GPUs are much more — or XPUs are much more important. And if that’s the case, what better thing to do than bringing the control, control your their own destiny by creating your own custom silicon accelerators. And that’s what I’m seeing all of them do. It’s just doing it at different rates and they’re starting at different times. But they all have started.“

A week ago, everyone was regretting not buying NVDA in the dip to $90 (and the 69% rally to $130 certainly proved those buyers right for a time). But after reading those comments, I’m not so sure I would buy a second dip to $90.

This article was written by Adam Button at www.forexlive.com.

• US August non-farm payrolls +142K vs +160K expected
• Canada August employment change +22.1 versus +25.0K estimate
• FOMC Waller : Time has come to begin reducing. Labor market softening/not deteriorating
• Waller Q&A: Forecasts could be wrong, must be nimble as data comes in
• Fed’s Goolsbee: Critical challenge is not letting things turn into something worse
• Fed’s Williams: Unemployment rate still low despite rise
• Williams Q&A: Jobs data consistent with a cooling economy
• More from Fed’s Williams: Not quite ready to say how big first rate cut should be
• Canada Ivey PMI 48.2 vs 57.6 prior
• WSJ’s Timiraos: Waller does not explicitly say „25“ or „50“, but leans to 25.
• Timiraos: The jobs report doesn’t neatly resolve the 25 versus 50 basis point debate
• The Federal Reserve blackout starts at midnight

Markets:

• Gold down $20 to $2496
• US 10-year yields down 1.4 bps to 3.72%, 2-year yields down 9.3 bps to 3.65%
• WTI crude oil down $1.07 to $68.08
• S&P 500 down 1.7%
• JPY leads, AUD lags

Non-farm payrolls Friday lived up to the hype, though it wasn’t exactly straightforward. The kneejerk reaction to the report was dovish and the US dollar sold off significantly as 50 bps cut odds rose to 57%. In that move the euro rose to 1.1154 from 1.1105 and the pound rose 60 pips to 1.3240.

It took about an hour for those moves to fade completely as the market took a second look at the jobs report and started having questions about whether the headline miss and revisions were enough to make up for a slightly improved unemployment rate. The retracement was compounded by Williams, who offered little in the way of a push for 50 bps, instead playing it safe.

The next big move came with the Fed’s Waller. Initially the market latched onto his talk about front loading cuts:

I will be an advocate of front-loading rate cuts if that is appropriate.

However the market then took a look at the totality of the speech and particularly a line saying the „labor market is softening but not deteriorating.“ That led to a drop in 50 bps cut odds to 23%.

But there is always reflexivness in markets and that, in turn, caused a rout in stocks and a flight to safety in bonds. That’s a classic case of market kicking-and-screaming that pushed 50 bps odds back up to 31%. For his part, Timiraos weighed in on the 25 bps side but I certainly wouldn’t take that as a leak, though it probably moved markets.

The major volatility in the day came in USD/JPY, which ranged from 141.79 to 143.89 and ultimately finished about 50 pips from the lows. But there were 5 touches on either side of that range as the remarkably-volatile trading continues. Eyes will be on Japan at the open on Monday after a tough week for the Nikkei.

The US jobs report wasn’t the only one released as Canadian unemployment ticked up to 6.6% from 6.4% and is now two percentage points above the lows. The lack of 50 bps from the BOC this week is a troublesome sign of central banks that are behind the curve and a close in brent at the lowest since 2021 certainly doesn’t help the loonie’s case.

This article was written by Adam Button at www.forexlive.com.

This looks like a double top in the S&P 500 and now you have to ask if we will go down and test the August low or consolidate here. The chipmakers certainly aren’t sending a great signal with NVDA down to $102.

On the day:

• S&P 500 -1.7%
• Nasdaq Comp -2.5%
• DJIA -1.0%
• Russell 2000 -1.7%
• Toronto TSX Comp -0.8%

On the week:

• S&P 500 -4.2%
• Nasdaq Comp -5.8%
• DJIA -2.9%
• Russell 2000 -5.4%
• Toronto TSX Comp -2.3%

This article was written by Adam Button at www.forexlive.com.

None of how the market is acting today in reaction to the lack of a strong 50 basis point signal from Waller should be a surprise.

Here is what I wrote back in June:

It’s been awhile since we’ve had a ’normal‘ rate cutting cycle so it’s worth a reminder about what happens and what always happens:
The market turns into a whiny teenager. It starts kicking-and-screaming
for rate cuts, with equities bleeding on anything that isn’t overtly
dovish.

If you don’t like that reference, then consider it like a toddler that wants a candy. They always want more and they want it right now. As the father of four young kids, there is no pleasing them.

This is exactly how markets behaved in 2008, in 2016 when rate hikes came too soon and how they behaved during the taper tantrum. The episode in 2019 was slightly less because Powell was seen as easing pre-emptively.

Fed funds target rate history:

This article was written by Adam Button at www.forexlive.com.

WTI crude is still clinging to support but the picture is looking increasingly dire for brent. The global benchmark closed today at the lowest since December 2021.

There have been a series of daily lows right around these levels and there are intraday lows that are worse since 2021 but this is the lowest daily and weekly close. That’s not a good sign.

I’d argue that the physical picture isn’t this bad, as we’ve seen hefty draws in US supplies and draws in global inventories. I think the market is anticipating a global growth slowdown and selling based on that as well as the likelihood of global production oversupply in H1 2025.

I think it’s also worth zooming out to the monthly chart to highlight the narrow range over the past two years. That’s indicative of a managed market which is exactly what OPEC has been doing. At the same time, it’s a reminder that OPEC hasn’t been great at managing the market over the past 25 years.

It’s also a reminder that brent is where it was in 2006. However when you adjust for inflation, $71 in 2006 is $109.50 today.

Even going back to just December 2021, the total inflation has been 20.25%, which makes $71 equal to $85.

That highlights just how much the price of a barrel has fallen in real terms, something that’s largely due to the US shale revolution but also underscores that it will be tough to make money in conventional oil from here against a backdrop of 3-6% annual global decline rates.

Further, adjusting the July 2008 all-time high of $147.50 to current dollars would yield $210.92 — an unfathomable sum.

The trouble for oil bulls right now is that any further selling opens up an ugly technical picture that could pave the way back to $60 and some uncomfortable decisions for producers.

This article was written by Adam Button at www.forexlive.com.

There aren’t many charts more technical than bitcoin and with today’s 4.5% decline, it’s sending all the wrong signals.

It’s only been below these levels for a few hours over the past six months and the last time it was here it was flushed down to $50,000 in something of a flash crash.

At the same time, the series of lower highs from $72K down to 65K over the past six months sends the wrong signal.

Moreover, there is a strong correlation between bitcoin and tech stocks, particularly semiconductors. That space is suddenly struggling as the market cools on its enthusiasm for AI. Broadcom reported results yesterday and is down nearly 10% today while Nvidia is down 4.5%.

This article was written by Adam Button at www.forexlive.com.

Headlines:

• USD/JPY extends fall alongside bond yields to start the session
• Risk on the retreat as bond yields fall
• Preview: Why August non-farm payrolls frequently disappoint
• What would it take from non-farm payrolls to get a 50 basis point cut?
• We’ve seen the flop and the turn, it is now on to the river
• What are the distribution of forecasts for the US NFP?
• Weekly update on interest rates expectations
• Eurozone Q2 final GDP +0.2% vs +0.3% q/q second estimate
• Germany July industrial production -2.4% vs -0.3% m/m expected
• Germany July trade balance €16.8 billion vs €21.0 billion expected
• France July trade balance -€5.88 billion vs -€6.09 billion prior
• UK August Halifax house prices +0.3% vs +0.2% m/m expected

Markets:

• JPY leads, AUD lags on the day
• European equities lower; S&P 500 futures down 0.6%
• US 10-year yields down 3.4 bps to 3.698%
• Gold up 0.1% to $2,519.39
• WTI crude up 0.5% to $69.51
• Bitcoin down 0.2% to $55,977

It’s all about the US jobs report today and there wasn’t too much to work with in European trading as such.

There was some minor positioning flows early on, with traders keeping a bid in bonds. 10-year Treasury yields fell to just under 3.70% and that triggered some safety flows in broader markets.

USD/JPY fell from around 142.90 in Asia to a low of 142.06 before recovering back to near 143.00 again now. Meanwhile, USD/CHF also retreated to a low of 0.8405 before keeping down 0.2% at 0.8420 currently.

In the equities space, US futures were lightly changed early on but then fell across the board with tech shares leading the drop. S&P 500 futures were marginally lower by 0.1% in the handover from Asia to Europe. But that eventually spilled to a 0.8% drop at one point before holding just above that now.

With traders potentially sensing more kicking and screaming, this is arguably the most anticipated US jobs report of the year so far.

Market pricing for a 50 bps move by the Fed is ~40% now. So, we’ll see how that as well as global growth concerns will change up after we get to the main event this week.

This article was written by Justin Low at www.forexlive.com.

Fundamental
Overview

It’s been a rough week for crude
oil as the price dropped more than 6% on renewed growth fears amid a couple of
soft US data. The delay
by OPEC+ to increase production from October didn’t spark a rally but it helped
to slow down the bearish momentum.

A lot now hinges on the US
NFP report today as good data should trigger a relief rally, while weak figures
will likely increase the bearish momentum on recessionary fears.

Crude Oil
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that crude oil broke below the recent low around the 71.60 level and
extended the drop into the 69 handle. If the selloff extends further, we can
expect the buyers to step in around the 67.68 level to position for a rebound
into the 71.60 level. The sellers, on the other hand, will want to see the
price breaking lower to increase the bearish bets into the 64 support
zone.

Crude Oil Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a downward trendline defining the bearish momentum. We
can expect the sellers to keep leaning on the trendline to position for further
downside, while the buyers will want to see the price breaking higher to start
targeting new highs.

Crude Oil Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the bearish momentum waned a bit as the price action became rangebound.
Today we have the US NFP report and good figures will likely trigger a rally,
while weak data might increase the bearish momentum. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we conclude the week with the US NFP report where the consensus sees
160K jobs added and a 4.2% unemployment rate.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

The plunge in early August when markets were throwing a tantrum was held by the December 2023 lows, at least on the daily chart. But even so, the pair has been trending in a lower highs, lower lows pattern ever since June this year.

The trend speaks to a check back in optimism in European equities in particular as well. That especially following the French snap election. But it also comes as bond yields fall and broader markets are also holding more cautious, even more so after the carry trade unwind episode.

And if risk trades are to falter again amid a softer US labour market report, that may be a good enough recipe for EUR/CHF to retest its record lows under 0.9300 next. That as market players will be chasing a flight to safety.

The consideration now is how much are markets really afraid of a hard landing in the US and the overall global growth outlook. Sure, employment conditions are softening but other data continues to suggest that things aren’t that bad for the US economy. But even so, are we going to see markets overreact again?

While the focus is on the Fed and the debate on 25 bps vs 50 bps this month, any tantrums thrown by markets will impact risk-related currencies. And EUR/CHF is one of that, so it is one I’d keep an eye out for – especially considering the charts.

If validated, the only key risk to any further downside is actually the SNB. The central bank has noted that they are watching closely the franc and have come out to say that its recent strength isn’t too welcome for the economy.

As such, there could be the potential for the SNB to intervene if things go too far, too fast.

This article was written by Justin Low at www.forexlive.com.

Fundamental
Overview

This week the growth fears
came back as the we got a couple of soft US data. Most of the weakness can be
attributed to the ISM Manufacturing PMI which disappointed as it missed
expectations, and the new orders index dropped further into contraction.

Overall, the report was
much better than the prior month, but it looks like the market wanted to err on
the defensive side heading into the NFP report. We also got the US Job Openings data on Wednesday, but it was
July’s data which was bad for many other indicators as it looks like short term
factors negatively affected the data.

We are going into the NFP release
with basically a 50/50 chance of either a 25 bps or 50 bps cut at the upcoming
meeting, so the data will decide by how much the Fed is going to cut.

In today’s context though, the
prospect of a 50 bps cut amid weaker labour market data might not be enough to
lift the stock market and could actually lead to more downside on recessionary
fears, so that’s something to keep in mind.

Russell 2000
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the Russell 2000 is now testing the major trendline.
This is where we can expect the buyers to step in with a defined risk below the
trendline to position for a rally into a new cycle high. The sellers, on the
other hand, will want to see the price breaking lower to increase the bearish
bets into the 1993 level next.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a strong support zone around the 2120 level where we can find
the confluence of the 50% Fibonacci retracement, trendline and the previous resistance
now turned support.

This is where the buyers
will likely pile in with a defined risk below the support to position for a
rally into a new cycle high. The sellers, on the other hand, will look for a
break lower to increase the bearish bets into the 1993 level.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that after the push lower on the ISM Manufacturing PMI, the bearish
momentum started to wane as the price action became mostly rangebound. We have
formed what looks like a falling
wedge right around the support zone.

This is generally a
reversal pattern, but a failed pattern can also be meaningful, so watch carefully
what happens after the NFP release today. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we conclude the week with the US NFP report where the consensus sees
160K jobs added and a 4.2% unemployment rate.

This article was written by Giuseppe Dellamotta at www.forexlive.com.