* On Nvidia....and AI

My guess is that is the end of the fun for Nvidia NVDA and the AI trade…

As of 4:28 p.m.:

Closing Breadth

Nasdaq-Advance Decline

S&P 500 Sectors

Nasdaq 100 Heat Map

I have a 3:30 p.m. research call and I will back after the BIG EPS announcements (tongue in cheek).

Radio silence for about an hour.

My pairs trade long CMG (-$0.72)/short SBUX (-$4.20) is doing well today.

Solid comment from TN:

TechNova

BTC : A reminder for newbies.

I am a little worried that many with no real Macro sentiment for the BTC asset class may have FOMO'd in treating it like any other equity, and perhaps partially or even entirely based on my posts. So I think it may be time for a baseline reminder.

1) I have been in BTC for just about 10 years now. My plan for my BTC stash is currently to exit around the year 2034 if my math is correct. That is currently the year I plan to take my very VERY large stash to ZERO. (Pending any other changes in life or important new information). So, no, I will not exit BTC simply because Degens who leverage long on the Perps every time they believe we are about to break out, get taken to the cleaners in a low liquidity environment.

2) My Buy points for BTC have been $3.3K, $6K, then a large allocation at $9K, then $13.5K, then a double down at $18K (which I posted on this Blog as a STRONG BUY), I then added at $22K, another big add at $35K when the ETF announcement came out (posted here again as a STRONG BUY), and then a top off at the bottom of the box ($60.5K) and another large slice add at $50K. I play my BTC hand with an open book.

3) BTC should only ever be plotted on a Log Scale. Something doesn't go from $0.10 to $74K in 15 years on a Linear scale. It means this asset moves double digits when most equities move in single digits. This is why you don't celebrate 10% up days as being 10%. You think of them as 2%. You do the same for down days or you will go insane. BTC has fallen as much as 80% before, in a short amount of time, only to then double to a new ATH 6 weeks later. It is by nature a High Vol product. The LULL is called the LULL because of the rare times in which it chops sideways.

4) The Long Term play is that there will never be more than 21M coins, that Hash Rates have never stopped rising in 15 years, and that the adoption rate is faster than the adoption rate of the internet and HTML. Those things do not change because Gamblers get caught in low vol high stakes bets by Future Market Makers.

5) All the models I build are based on probabilities. Both for Crypto and for Equities. I would not use them if they had not brought me great success in the past. I wrote a missive on Probabilities that I suggest you look up and read (if this blog still even allows searches). If you have a 1 in 10 chances of being slapped, but someone offered you $10K if you did not get slapped, that is a high probability trade, that you should jump on every time. If you decide to play and get slapped the very first time, it does not mean the probabilities were wrong. It means you were VERY unlucky. Probabilities are correct over time and over a large sample.

I will write another post if I have a chance today, on what this liquidation means.

Spoiler: It should not be that easy this late in Crypto Summer to cause a cascade on the Longs. It means that Liquidity on the BUY SIDE is still very lite. This leads me to believe that Crypto Summer is not quite ending yet. I suspect we may need to push into September and endure the same Vol that the Equities Market seem set up for in September.

No change in my BTC plans.

Very happy to have a 200% position. Not planning on adding or selling.

My next move will be at BTC = $100K.

I will evaluate how we got there, and how strong resistance will be at that number.

Homebuilders seem to be rolling over — another Fin TV fave.

Adding to financial shorts, which are currently the sector de jour.

As of 10:30 a.m.:

Low Volume

- NYSE volume 90M shares, 33% below its one-month average;

- NASDAQ volume 1.28B shares, 24% below its one-month average

- VIX: + 0.71% to 15.54

Breadth

S&P 500 ETF Sectors

% Movers

Nasdaq 100 Heat Map

Here is a related bit on the market structure point — see below.

Now Super Micro Computer SMCI has delayed filing their 10-K.

The stock is down by 18%.

When something like this happens, a lot of institutional owners cannot own it.

Then, after reading the short report on it from Hindenburg Research, a lot of institutional owners shouldn’t want to own it.

The company is not nearly as sexy as it sounds.

See the chart below, and where the stock came from.

It is a commodity, white-box server manufacturer still trading at a massive valuation. But digging into it, and granted I might not have this exactly right, if you add up all the ETFs alone, it looks like 80% of the stock is owned by retail. 

Then there are all the options and other stuff on top of it, which is retail. This is why the stock is not down more, and still trades where it does, in my view. Retail just doesn’t care, doesn’t understand these things, buys the current hype and not the future cash flow, the whole deal. Passive index funds just hold. 

I have added to my Goldman Sachs GS ($506.06) and Morgan Stanley MS ($102.30) shorts.

From Knowledge@Wharton: Without Guardrails, Generative AI Can Harm Education - Knowledge at Wharton (upenn.edu)

From Peter Boockvar:

Another hike to come?/No lift still in purchases/Earnings comments

It's broadly quiet out there ahead of Nvidia tonight but some things worth nothing. Ryozo Himino, the Deputy Governor of the BoJ spoke overnight and said "There is no change to our stance that we would adjust monetary easing if economic activity and prices are likely to meet projections." He also said that they will review the market reaction to what they did in July and "The first job we must do is to watch financial markets with an extremely high sense of urgency, as I think they remain unstable." He acknowledged too that any strengthening in the yen could impact export focused Japanese businesses but said that there is not a wide gap between FX budgeting and the levels currently seen.

He's not really saying anything ground breaking but seems committed to hiking again this year though apparently got some weaker knees with the yen short unwind. The 2 yr JGB yield rose 1.2 bps to .38% which is the highest in 3 1/2 weeks. The 10 yr yield was up by 2 bps to .90%. The yen though is weaker but back to where it was on Monday. The Nikkei was up by .2%.

Also overseas but not market moving was the 1 pt gain in French consumer confidence which follows the weakening seen in Germany. That's the best since February 2022 and likely getting an Olympics lift.

In the US, while mortgage rates fell again to 6.44% on average vs 6.82% one month ago and 7.3% one year ago, there still is really no lift in purchase applications. After falling by 5.2% last week, they rose just .9% w/o/w and remain down almost 9% y/o/y. Refi's were flat w/o/w, though up 85% y/o/y off depressed levels.

Purchase Apps

To the earnings calls of note where mixed and uneven economic activity remains the case.

From Nordstrom:

"At both Nordstrom and the Rack, customers responded positively to newness and their favorite brands." They also responded to their Anniversary Sale during the quarter. Nordstrom had a comp gain of .9% and the Rack saw a 4.1% increase. Digital was up 6.2%.

"The beauty category continued to be a top performer for us at both banners. Its 2nd quarter sales growth was supported by the strength of fragrances and haircare essentials throughout the Anniversary Sale. The kids category sustained its momentum in Q2 as well."

"Turning to our outlook for the year, while we are pleased with our first half results, the external environment remains uncertain. When considering the puts and takes and appreciating that there is still a lot of this fiscal year left, we believe it is prudent to be appropriately cautious with our outlook." They expect "full year revenue in the range of a decline of 1% to an increase of 1%, which includes a headwind of approximately 135 bps from the 53rd week in 2023's results."

On the consumer, "We saw good growth across all income cohorts at the Rack and then at Nordstrom stores, our higher income consumers or customers, we saw spending improve the most out of that in that manner. And then on credit losses, we shared early in the year that we expect to see losses tick up modestly this year. That's, I think, consistent with what the industry has been seeing, and that's no different, but it's within our plan and our guidance. So nothing that's unforeseen there, but we are seeing credit losses tick up a little bit."

From the Kohl's earnings release where comps fell 5.1%, double the estimate:

"We have taken significant action to reposition Kohl's for future growth. However, our efforts have yet to fully yield the intended outcome due in part to a continued challenging consumer environment and softness in our core business. During the 2nd quarter, our customers exhibited more discretion in their spending, which pressured our sales even as customers transacted more frequently."

PVH has their earnings call this morning but said this in the release:

"Overall revenue in the Company's international businesses decreased 4% compared to the prior year period, primarily due to the challenging consumer environment in Asia Pacific, particularly in China and Australia, and the continuation of the Company's planned strategic reduction in sales in Europe to drive overall higher quality of sales in the region. In North America, revenue in the Tommy Hilfiger and Calvin Klein businesses combined increased 1% compared to the prior year period, with modest growth in the wholesale business and a low single-digit decline in the direct-to-consumer business."

Shifting to the housing market, this from American Woodmark, the maker of kitchen cabinets and vanities that are used for both remodel and new builds and expected to do around $1.8b in sales this fiscal year.

They saw a 7.9% y/o/y revenue decline and "This was below our expectations provided during last quarter's call due to weaker demand during the summer in the remodel channel."

"Y/o/Y growth in single family housing starts have slowed over the past three months, putting downward pressure on cabinet installations in future quarters. The focus remains on future rate cuts from the Fed which could drive stronger demand in calendar 2025."

Also, "Our home center customers have noted higher interest rates and macroeconomic pressures leading to weaker spending on projects. This has been more significant for higher priced discretionary projects like kitchen and bath. We are not experiencing a loss of share with our customers, but we do expect weaker demand vs our expectations at the start of the fiscal year."

To a macro question to Aaron Levie, the CEO of BOX, he said:

"I think we still see some degree of incremental pressure in areas, not incremental, but relative pressure in areas like SMB (small and medium sized businesses), and a couple of regional segments...But I think we're happy with the performance on a broad basis, even though there are some areas where we still see some degree of macro pressure in areas like SMB, etc...

Note, these were posted late this morning, but are still telling.

Upside:

-AMBA +19% (earnings, guidance)

-SVRE +17% (earnings; announces strategic acquisition of Micronet’s Generation-3 Camera IP)

-WEST +11% (files to exchange warrants for shares)

-WALD +10% (earnings, guidance)

-PTN +8.7% (US FDA confirms acceptability of remaining PL9643 Phase 3 Pivotal clinical trials in Dry Eye Disease)

-ME +8.3% (Unit Lemonaid Health now offering GLP-1 Medication through $49/mo Weight Loss Membership Program in conjunction with this new offering of medication charged separately starting at $299/mo for compounded semaglutide)

-AVPT +7.2% (announces commencement of an offer to purchase and consent solicitation relating to its warrants)

-SMTC +6.1% (earnings, guidance)

-BOX +5.8% (earnings, guidance; raises share repurchase program by $100M)

-ROL +5.0% (momentum)

-VNET +4.5% (earnings, guidance)

-BZUN +4.4% (earnings)

-TWFG +4.2% (earnings)

-KSS +3.1% (earnings, guidance)

-OOMA +3.1% (earnings, guidance)

-MRVI +2.8% (Wells Fargo Initiates MRVI with Overweight, price target: $10; Cygnus Technologies and TriLink BioTechnologies collaborate to launch AccuRes Host Cell DNA Quantification Kits)

-CHWY +2.6% (earnings, guidance)

-WATT +2.6% (2W PowerBridge Transmitter Receives Full FCC Certification)

-ELF +2.5% (announces $500M share repurchase program)

-DCI +2.1% (earnings, guidance)

-SWTX +2.1% (US FDA Grants Priority Review to Mirdametinib NDA for treatment of Adults and Children with neurofibromatosis type 1-associated plexiform neurofibromas (NF1-PN) with PDUFA target action date of February 28, 2025)

-JWN +1.7% (earnings, guidance)

Downside:

-NBIX -16% (disappointing Schizophrenia study data)

-NCNO -14% (earnings, guidance)

-ANF -11% (earnings, guidance)

-PDCO -9.0% (earnings, guidance)

-PVH -8.6% (earnings, guidance)

-FL -8.2% (earnings, guidance)

-BZ -7.2% (earnings, guidance)

-PRTG -6.1% (earnings, guidance; considers finding a partner for one or more assets, a sale of company, a merger, restructurings (both in and out of court), a company wind down, further financing efforts, or other strategic actions)

-BBWI -5.2% (earnings, guidance)

-GCI -4.8% (CitiGroup Cuts GCI to Sell from Neutral, price target: $5.10)

-SJM -3.7% (earnings, guidance)

-PSNY -3.5% (appoints Michael Lohscheller as new CEO, effective Oct 1st)

I have pressed my JPM short.

I am adding further to OXY long.

*SuperMicro delays filing to review controls over reporting. 

And the air leaks out of AI hype machine....

* My tales are different than their tales...

The snippet (below) was sent to me:

"Historically semi content accounted for no more than 10- 20% of total data center cap ex (infrastructure, power, AC, etc). The Street is looking for NVDA to deliver about $180 billion in revenues next year. Assuming 80% of NVDA revenues next year will go to data centers, you would need a total data center capex worldwide to be somewhere $1 trillion to $1.5 trillion next year. DelOro estimates total data center cap ex last year was $250 billion and New Street Research puts it at $300 billion. This year the total cap ex of MSFT, FB, Google, and AMZN will be around $160 billion. Hmmm...."

The one thing that plugs part of the difference over the short term is the pricing Nvidia is getting on their parts. BUT that cannot last forever, when those buying the product are losing money hand over fist selling the product the Nvidia parts produce.

See Nvidia's gross margin percentage over time – where it was and where it is now, and the absolute price per part which is through the roof.

Then another part of the gap is 2x/3x ordering of parts in short supply (although lead times now I think finally in balance as the backlog will be unwound by the end of next quarter) and parts going into all sorts of other odd and unusual places not fully captured in the data below.

But a fair bit of the grey market consumption is also likely not sustainable. 

A Thin Reed Indicator

Oh my, they are all rolling in now.

Below... on NVDA watch party.

As much as below is about NVDA, it is commentary about the broader markets. This is what they have become. All the online sports gambling guys should offer a stock trading platform or vice-a-versa:

The unofficial Nvidia earnings watch party at an NYC bar is the latest sign the AI hype isn't going anywhere

By [email protected] (Ana Altchek)

* Nvidia's second-quarter earnings will be closely watched by the tech industry and Wall Street.

* Someone is even throwing a watch party for the earnings call at an NYC bar.

* The unofficial event, organized by the owner of Upright Analytics, is the latest sign of Nvidia's impact.

It's common to head to the bar to watch a hotly anticipated football game.

After all, it's a chance to soak in the heightened atmosphere with other sports fans.

But what about the most anticipated tech earnings of the year?

Interest in Nvidia's quarterly earnings on Wednesday has reached such a fever pitch that it's even attracting an unofficial watch party at an NYC bar.

The idea started when Lauren Balik, owner of Upright Analytics and co-host of the Tech Bros Show, sent out some feelers on X about renting a bar space to play the earnings call and the subsequent financial commentary.

A few hours later, Balik said it was officially happening and announced it would take place at 3:30 p.m. at the bar Storehouse in Flatiron.

It's on. $NVDA NYC Watch Party August 28, 3:30pm - ? at Storehouse.

They'll let us play the earnings call over the speakers + keep on CNBC and other financial news channels on a few TVs.

I'm pumped. This is going to be funny either way.

From Druck:

Though the S&P Short Range Oscillator dipped from 7.99% to 6.23%, the markets remain well in overbought territory.

Occidental Petroleum OXY is now my largest individual equity position:

This table is a valuable resource for momentum-based short-term traders:

From JPMorgan:

US: Futs are flat into NVDA earnings this afternoon; NVDA is +31bps pre-mkt with the balance of Mag7 performing similarly and Semis are also bid. Bond yields are lower in the front-end with 10Y unchanged. USD is looking to reverse yesterday’s gains as cmdtys are lower, led by Energy though Base Metals are continuing their recent bull run. The macro data focus will be on Fedspeak, bond auctions, and mortgage applications (XHB +9% over the last 2 weeks).

and...

EQUITY AND MACRO NARRATIVE: Stating the obvious, today is all about NVDA and seems like after the print the market will be on holiday until next week. Below is a detailed preview on the earnings release, a repost of the most recent positioning update, and the usual data levels and news articles.

Aggregate corporate cash as a percentage of total assets has hit a multi-decade low.

This, when combined with higher stock prices, could result in a pullback in corporate share buybacks:

My investment short Walgreens WBA hit another new low yesterday.

From The Divine Ms M:

Bonus — Here are some great links:

Nvidia to Replace Intel in the Dow 

Stocks May Consolidate

Are Utilities at an Inflection Point?

Wednesdays Before Labor Day Holidays Are the Best