Nvidia Proves to Be Irresistible to Dip Buyers
There's a reason why the tech giants keep attracting inflows.
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After two days of mild corrective action in big-cap technology stocks and rotation in the DJIA and the Russell 2000 IWM, the market reverted back to its narrow technology leadership. The Magnificent Seven (MAGS) stocks jumped 2.5% and pushed the Nasdaq 100 QQQ to a gain of 1.1%.
When QQQ leads, the rest of the market is lagging behind. Breadth was 3,700 gainers to 5,550 decliners, and more stocks hit new 12-month lows than highs. The DJIA was the loser as it gave back all of the prior day's gains and more. The Russell 2000 dropped back under its 50-day simple moving average with a loss of 0.35%.
Many market players were hopeful that the market was ready for stronger rotational action into lagging stocks, but dip buyers still find Nvidia NVDA and its cohorts to be too enticing to pass up. Valuation may be problematic in some cases, but the price action creates an aura of safety, and that is why the tech giants keep attracting inflows.
There isn't much news flow out there right now, but inflation news on Friday will be important, and the presidential debate on Thursday night should be quite interesting. I suspect that there are some Democrats hoping for Biden to do poorly so it would be easier to replace him. That would be an interesting scenario for the market to contemplate.
There are a lot of stocks drifting lower in lackluster trading, but it is still weeks before most earnings reports hit, so there isn't much support. I do like some of the values that are developing, but this price action requires great patience.
Have a good evening. I'll see you on Wednesday.
