Nvidia and Indexes Rebound, But Is It a Fakeout?
Maybe Nvidia isn't really that expensive after all.
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Investors are rethinking a "sell the news" reaction to Nvidia NVDA Thursday morning. Nvidia and the Nasdaq 100 QQQ were sharply lower after the chip company's earnings results were released Wednesday night, but things reversed sharply overnight. Nvidia is still trading down about 2%, but the Nasdaq 100 is positive after it closed a gap in its chart that was created on August 14.
Some of the analyst comments about Nvidia that are helping are:
Nvidia price target raised to $155 from $115 at JPMorgan.
Nvidia selloff "simply another buying opportunity," says Cantor Fitzgerald.
Nvidia should be bought on weakness, says Barclays.
Nvidia earnings selloff should be bought. says UBS.
Nvidia price target raised to $140 from $120 at Raymond James.
Expectations were so high for Nvidia that it was almost impossible to avoid some disappointment, but after the news was digested, it became clear that Nvidia is not terribly expensive, considering how fast it is still growing.
On Wednesday night, the market looked set for deeper corrective action. Is the rebound Thursday morning going to turn into a quick recovery, or is it a fakeout that will suck in some hopeful bulls before turning on them? My level of trust in the ability of the market to generate another upleg at this point is very low, but the price action will tell the story.
The market's attention will now shift to the next big event, which is the PCE inflation news on Friday morning. Next week there will be the July jobs news, which is the last major economic report before the Fed interest rate decision on September 18.
The market has largely priced in a rate cut and has been holding up primarily due to the belief that the Fed has engineered a soft economic landing while defeating inflation. As long as that belief continues, it will be tough for the bears to gain much traction.
We still have the issue of September being the poorest month of the year, but this rebound on Thursday morning is going to surprise some bears and maybe even cause some squeeze action. We'll see how well things hold up as the day progresses.
I continue to hold high levels of cash and will be very selective with any new buying.
At the time of publication, Rev Shark had no positions in any securities mentioned.
