by Jason Bodner
November 10, 2026
For centuries, sailors told of giant waves rising from calm seas. Scientists dismissed these “rogue waves” as myths. Then, on January 1, 1995, instruments on an oil rig logged an 84-foot wave.
Yes, “rogue waves” really happen and are real, but they remain rare enough to escape easy detection.
Last week, we saw this kind of rogue wave in the markets. After the midterms, Wednesday brought 342 unusual inflows, ranking as the 17th strongest trading day among the 9,200-trading days we’ve tracked since 1990. That puts it in the top 0.2%. Then, on Thursday, the NASDAQ 100 plunged 6.4% as we logged 356 outflows. In 36-years, we’ve never seen such extreme opposite days, back-to-back, and by volume, this was the fourth heaviest two-day stretch in our data bank. Only the April 2025 tariff crash was bigger.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Headlines give us plenty of explanations – after the fact. A lawmaker called for an AI pause. Texas elected a governor seeking data-center restrictions. One big technology company missed its earnings target, and another reportedly soured on neoclouds. Hedge funds were blowing up. Margin debt hit a record high.
Pick your favorite headline (or two) if you want to assign blame for last Thursday’s massive reversal.
Here’s what I think really happened…
Looking at the money flows, this was a classic case of forced selling. Goldman Sachs estimates technology-focused hedge funds lost over 4% on Thursday, erasing a year that was up 24% in June. Funds de-risked before the election, then chased Wednesday’s rally, then dumped stocks on Thursday. Walleye Capital is returning $2 billion to investors and slashed its stock-picking team. Engineers Gate gutted its fundamental equity group. Leveraged ETFs had to rebalance, selling tens of billions in stock, mostly technology stocks.
I’ve seen this before, firsthand. During the 2008 financial crisis, I ran North American Equity Derivatives at a major Wall Street firm. I oversaw the liquidation of a major Wall Street firm’s massive options book, worth billions in notional value. The order came from the top: “Sell everything.” Options normally just a penny wide were suddenly trading 10 to 20-times wider. Buyers vanished, just like the Jeremy Irons character said in the film, Margin Call: “Sell everything, at whatever price the market gives you.”
That’s what I call “forced selling.” Prices stop measuring value and start reflecting desperation.
Our data charted last week’s violence. AI buildout stocks, from chips to storage to power, saw 189 outflows against just 10 inflows this week. Meanwhile, health care, consumer, utilities, staples, real estate, and financials were net bought. Money didn’t leave the market. It fled a crowded corner.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
What happens next? Near term is unclear, but flows are a roadmap, and Friday brought encouraging signs.
- Selling dried up. Outflows plunged from 356 on Thursday to 83 on Friday. Chip stock outflows went from 51 to just one.
- Breadth improved. Stocks near their 55-day lows dropped from 36% to 25% in one day.
- Our Big Money Index (BMI) kept rising, reaching 43% last week. With a built-in 25-day moving average, the BMI is shedding October’s heavy selling days. Even with relentless selling last Thursday, it can’t return to oversold before late November. Historically, when the BMI rises as markets plunge, the lows arrive quickly, usually inside of two-weeks.
- The final test will be a retest. If prices revisit Thursday’s lows on lighter selling, forced sellers may be finished. Another shakeout is possible, but most of the damage appears done.
Now let’s zoom out. That’s where the situation brightens.
Since 1990, the NASDAQ 100 has plunged by 4.5% or more in a day 14-times while within 20% of its high and with our BMI below 50%. One-year later, it was higher all 14-times, averaging a stunning 57% gain.
Thursday became #15.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Chips are hurting, so let’s look there next. Thursday, the largest semiconductor ETF plunged 11.2%, its second worst day since 2000. Since then, it fell 8% or more in a day 12-times with our BMI below 50%.
A year later, it was higher 11 of 12-times, with an outstanding median gain of 84%. The sole miss came in the days after 9/11, 2001, but that was followed by 11-consecutive increases:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
And don’t forget, this is not a bear market, and we are nowhere close to a recession. Those past reversals in chips came with falling profits, stretched valuations, or a Fed slamming on the brakes. By contrast:
- S&P 500 earnings are growing 30% and sales 13%, more than double their 10-year averages.
- Stocks trade below their average valuation.
- October added 165,000 jobs, and productivity rose 3.6%.
- Among AI chip stocks, 76% have seen earnings estimates rise this month.
- Bank of America says $140 billion flowed into cash funds in one week.
That’s fuel for growth, not a widespread retreat:
Now, what about the AI threat? Let’s take the worst case. Suppose lawmakers halt every new data center. Projects already underway still need chips, memory, storage and optics, so let’s imagine AI adoption stops tomorrow… no new frontier models. Ridiculous, but let’s consider it. AI agents change the math. Instead of answering one question, agents execute dozens of steps. Gartner estimates agentic tasks require five to 30-times more computing than a chatbot exchange. If existing users add just one or two agents, the compute demand compounds without any new users. That strains already stretched capacity.
Politics won’t stop, either. According to Elon Musk, Texas’s governor-elect says permitted data-centers can finish. New projects face rules on taxes, electricity, water, and labor. Companies can navigate those. States that push data-centers away simply hand jobs and tax revenue to their neighbors.
History is on our side. Since 1950, the S&P 500 has risen in the year after all 19 midterm elections. Technology has done better. Since 1990, the NASDAQ 100 has beaten the S&P 500 every year following midterms.
And next year is the pre-election year, historically the strongest of the four-year cycle. Since 1950, the S&P 500 has failed to grow just twice, 2011 and 2015 – one year was flat, the other fell by less than 1%.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Our flows tell the same story. In mid-October, our Big Money Index sank to 22.9%, deep in oversold territory, where institutional selling is heaviest. On October 20, it climbed out of oversold conditions. That’s happened 23 other times since 1990. A year later, the NASDAQ 100 was higher 19-times.
This rebound in the BMI was fast. The BMI surged 15-points in three-weeks from below 30%. Historically, the NASDAQ 100 was higher a year later over 80% of the time, with a median gain of 28%.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Margin debt is another worry. It hit a record $1.5 trillion in June, and that leverage needs unwinding. But we saw a test run. In July, margin debt plunged by a record $85 billion. The S&P 500 shrugged it off, hitting a new high in October. Flushing leverage isn’t the end of a bull market. It’s routine maintenance.
The near-term may be choppy. Flows will say when the coast is clear. But forced sellers are running out of ammunition, earnings are growing twice as fast as usual, and AI demand keeps compounding.
History favors patient investors.
“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.”
–William Arthur Ward
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Great Earnings Will Keep Fueling Market (and Economic) Growth
Income Mail by Bryan Perry
Bipartisan Investment Themes For 2027
Growth Mail by Gary Alexander
Food for Thought (and Action) on Veteran’s Day
Global Mail by Ivan Martchev
On Market Moves and Political Repercussions
Sector Spotlight by Jason Bodner
How to Ride the Market’s Rare but Powerful Rogue Waves
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Jason Bodner is a co-founder and co-owner of Mapsignals. Mr. Bodner is an independent contractor who is occasionally hired by Navellier & Associates to write an article and or provide opinions for possible use in articles that appear in Navellier & Associates weekly Market Mail. Mr. Bodner is not employed or affiliated with Louis Navellier, Navellier & Associates, Inc., or any other Navellier owned entity. The opinions and statements made here are those of Mr. Bodner and not necessarily those of any other persons or entities. This is not an endorsement, or solicitation or testimonial or investment advice regarding the BMI Index or any statements or recommendations or analysis in the article or the BMI Index or Mapsignals or its products or strategies.
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