Nvidia Sucks the Life Out of the Market
This is troubling action.
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Analysts and pundits are celebrating a terrific earnings report from Nvidia, and the stock is up nearly 10% on the news. Unfortunately, Nvidia NVDA is doing little to benefit the rest of the market.
A few other chip names, such as Super Micro Computer SMCI and ASML Holding ASML, are green, but they have already faded from early highs.
What is most notable about the market action is that breadth is running around two-to-one negative, and even the Nasdaq 100 QQQ, which is the home of big-cap technology, is running two-to-one negative as well.
While Nvidia did not experience a "sell the news" reaction that many were worried about, hundreds of other stocks are experiencing that phenomenon. Small-caps IWM are lagging badly, with a loss of 0.7%, which puts them at their lowest level since May 13.
What is also notable is that there are no pockets of speculative action outside of Nvidia. Two of the biggest gainers are leveraged Nvidia single-stock ETFs (NVDU and NVDL).
Nvidia has a very large market cap and an outsized impact on the indexes, so it is covering up much of the weakness. However, the logical question is whether this is the start of a market top. If Nvidia can’t lift the broader market with a stellar report, then what will bring in buyers to keep the trend going?
This is troubling action, but we will need to see the close before we can draw any conclusions.
I’m tightening up stops and am not interested in new buys right now. I did add some Viking Therapeutics VKTX, as it is finally finding some support near the $63 level. I'm hoping we will see opportunities in smaller-caps as they pull back to support level, but there is no rush at this point.
At the time of publication, Rev Shark was long VKTX.
