Yesterday’s relief rally in US equities was short-lived as the market reversed course in a violent session. The initial futures reaction to the midterm results was fully reversed, with the GS US Equities Mid-Day Color indicating a sharp decline across various sectors.

One of the notable differences in today’s session was the significant move lower in the Mag7 (GSX1MEGA) index, which fell by 400bps. This was the second-biggest move lower this year, indicating that the demand seen yesterday was short-lived.

The AI trade remains under extreme pressure, with Neoclouds (GSXUNEOC) falling by 14%, Memory (GSTMTMEM) down by 12%, and AI (GSTMTAIP) down by 8%. This pressure is evident across the sector, with Semis falling by 9% and driving the negative price action loop. The SOX index is now down by 35% from its local highs, its third-largest peak-to-trough selling in the past three years. NVDA is also red on the year, adding to the pressure.

Pain levels are high, with the HF VIP vs VIP Short (GSTHVIPP) indicator showing a 200bps move lower. This indicates that positioning pressures and leverage are being unwound as funds are forced to sell into weakness. Our intra-day PB data also points to the most pain within L/S TMT investors (Fundamental TMT books down by 382bps as of 10:30 EST). Systematics are the only strategy positive on the day, up by 51bps as of 10:30 EST.

Volumes are also tracking higher, up by 32% vs yst and 57% vs ytd avg. However, liquidity has evaporated, down by 65% vs the YTD avg. This lack of liquidity is exacerbating moves, making it difficult for investors to navigate the market.

ETFs are also seeing high volumes, up by 34% (highest since April), and Retail is selling. This feels like top-down pressure being applied via macro instruments. Market thoughts from Flood indicate that the market is experiencing a lot of “why” questions, with little changed overnight. Supply in our flows (minimal defense), but market supply feels top-down and indiscriminate via index/ETF/basket/macro products.

In the sector, TMT is under pressure, with the AI trade under extreme pressure for a second day post-midterms. Supply in our flows (minimal defense), but market supply feels top-down and indiscriminate via index/ETF/basket/macro products. Biotech and tools are seeing broad supply (~-1.9 B/S skew), while large pharma and the index are seeing demand. HC is balanced in aggregate but bifurcated underneath, with broad supply in biotech/tools (~-1.9 B/S skew) and demand in large pharma and at the index level.