A Week for the History Books: How Risk Unwound, One Market at a Time
Wendyy_
6:27 AM · Feb 2, 2026
This was not a random sell-off.
It was a sequenced, methodical breakdown that unfolded day by day across asset classes.
Rather than a single shock, markets experienced a chain reaction — each segment cracking in turn and passing stress forward. By the end of the week, nearly every major risk asset had absorbed the impact.
Here’s how that progression unfolded.
Monday: Small Caps Blink First
The week began with a sharp reversal in the Russell 2000 Index, which had just pushed into fresh highs near 2,838.
Small-cap stocks often act as the market’s early warning system. They are more sensitive to liquidity conditions, credit availability, and optimistic growth assumptions. When risk appetite begins to fade and capital starts pulling back, small caps are usually the first to feel the pressure.
That early weakness wasn’t noise — it was the first sign that something beneath the surface was starting to shift.
Tuesday: The Dollar Breaks Down
On Tuesday, attention turned to the U.S. Dollar Index, which slid to multi-year lows.
The move followed comments from President Trump suggesting little concern about a weaker dollar, alongside growing speculation about possible yen intervention. Traders interpreted this as a signal of policy tolerance toward dollar softness, and positioning adjusted rapidly.
Currency markets often serve as silent pressure points. When the dollar destabilizes, it forces repricing across global assets — equities, commodities, and capital flows all feel the ripple effects.
Wednesday: Support Vanishes for the S&P 500
Midweek, selling pressure reached the S&P 500.
U.S. officials publicly denied any plans for currency or market intervention, removing a key assumption many investors had been leaning on. That clarification mattered more than it seemed. Expectations of policy backstops had quietly supported risk assets, and once those expectations disappeared, selling accelerated.
This wasn’t panic.
It was repricing.
Thursday: Tech Finally Gives In
By Thursday, the weakness spread decisively to the Nasdaq Composite.
Technology stocks had remained resilient longer than other sectors, but rising pressure eventually caught up. When leadership sectors begin to roll over, it often signals that risk reduction is becoming systematic rather than selective.
At this stage, the unwind was no longer isolated — it was broad and coordinated.
Friday: Metals Collapse Under Leverage
Friday delivered the most dramatic move of the week.
Gold and silver sold off aggressively, not due to collapsing physical demand, but because of heavy liquidations driven by leverage and margin pressure. In futures-dominated markets, rapid price declines can trigger forced selling that overwhelms fundamentals.
That dynamic played out in full view, resulting in one of the sharpest short-term drawdowns in precious metals in decades.
Saturday: Crypto Follows the Liquidity Trail
Once selling pressure had swept through the most liquid traditional markets, crypto was next.
Bitcoin and Ethereum both declined over the weekend. As usual, high leverage amplified the move. Crypto did not lead this downturn — it followed it.
When global liquidity tightens, no risk asset is immune.
The Bigger Picture: A Chain Reaction, Not Chaos
This week wasn’t about one bad headline or one broken market. It was a domino effect:
Small caps weakened → the dollar shifted → equities repriced → metals were liquidated → crypto followed.
Each step increased the probability of the next.
Understanding this sequence matters. It highlights how modern markets transmit stress — not instantly, but progressively, as capital retreats from risk in layers.
This wasn’t randomness.
It was structure revealing itself under pressure.