This Market Favors More Upside But Patterns Are Messy
Nvidia triggered some increased volatility and rotational action as a post-election gap has yet to be filled.
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All of the major market indices managed to produce solid gains on Thursday, but it was a very bumpy ride. Earnings news from Nvidia NVDA was the primary catalyst for the big swings. While the report was ahead of estimates, revenue guidance was lower than expected, and the company stated that it would take a couple of quarters to fulfill the strong demand. It wasn’t a bad report, but the setup favored a "sell the news" reaction.
Stocks dropped very sharply at the opening bell, but there was a very strong rotation out of the Magnificent Seven MAGS and big-cap technology names and into the Russell 2000 IWM and secondary stocks.
As the day progressed, the Mag Seven names recovered, and the smaller stocks continued to advance. The end result was very good breadth with about 6,800 gainers to 2,600 decliners and over 600 new 12-month highs.
Bitcoin IBIT continued its very strong uptrend, but there was wild volatility in some of the bitcoin-related names, like MicroStrategy MSTR and Coinbase COIN as speculative action became too frothy.
The bulls have some good momentum, and they also have positive seasonality working for them as we head into Thanksgiving week. On overage over the last 50 years, stocks have trended higher from November 20 through the end of the month.
One problem is that the indices' technical patterns are messy. There is still an unfilled post-election gap on all the major index charts, and there has not been good consolidation. Many charts are extended and need some time to develop better, but the impatient bulls are not allowing that to happen.
The bulls have control of this market, and conditions favor more upside, although some better chart development would be helpful
At the time of publication, DePorre was long NVDA.
