Nvidia Reverses and the Rationalizations Come Flooding in
If Nvidia moved the S&P on the way up, it ought to move it on the way down.
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The Market
Note: I am going on vacation. The next edition of Top Stocks will be next weekend, June 30.
Let’s talk about rationalizing in the market. We all rationalize in our daily lives. For example, you see a shirt that you desperately want but you look at the price and think, "Yikes." But, gosh, you want that shirt. So, you begin to rationalize. "I haven’t bought a new shirt in while. I can wear it with this pair of pants. It’ll look great at (insert whatever function here)."
Whatever your list of excuses, you know you are going to end up buying it because you want it. Is the market any different?
Last week, as Nvidia NVDA rallied, I heard all sorts of excuses from folks about why it had to be owned here. Why it was still OK to buy, mostly because of fear of missing out, but that’s not what they called it.
Fast forward to today. NVDA reverses on some massive volume and now the rationalizations are that it needed a rest (it needed one last week, too). The rationalizations are that there are all these folks just waiting to buy it when it comes down. Wait, you were supposed to chase it last week and this week you’re supposed to buy it on a dip. Which is it? That is what rationalizing sounds like.
I don’t know if NVDA is done from here. I know that we had a great trade with a target that measured 1140 to 1150 (the equivalent of 114 to 115 on the post-split stock). At the time, it reached the target I noted that it often overshoots. And it did.
I do know that when (if) the stock sets up again as a buy, I hope I will see the opportunity once again. But what does it mean for the overall market? If it moved the S&P on the way up, it ought to move it on the way down. Same with Nasdaq.
I maintain that, if we can get some downside into the end of the month, I think we would get a set up for a decent oversold rally in July in the "others." And if it’s NVDA and the other semis that take us down, it would also change sentiment. At least, that’s how I believe it would happen.
New Ideas
If folks are going to roll back into the DJIA stocks, then a stock in the DJIA that I have liked for a while (and hasn’t done a thing) is Merck MRK. If it can break out over 132, it measures into that 140 area.
Another name, also in the DJIA, is Amazon AMZN, which we looked at last week with a positive eye. It really needs to get over 190.
Today’s Indicator
The 10-day moving average of the put/call ratio made a lower low today and is now not far from last summer’s low reading (high in stocks).
Q&A/Reader’s Feedback
I was asked if XLE is OK to buy in the next few weeks as the "others" get oversold. Yes. I would like to see it dip one more time into the end of June before it crosses that downtrend line around 92. The chart has not made a higher high in nearly three months. That has to change.
Nike NKE filled the gap that I had been looking for and then pulled back last week, tagging the lower line. There is still an awful lot of resistance all the way up now so I’ll call it a hold/buy but if it gets under that lower line, it’s in trouble. Perhaps the Olympics will help it.
I was asked what the measured target is on Honeywell HON from the recommendation back in May. I can measure something in the 220 to 225 area now. There is a chance that there is another measured target in the upper 230s but let’s see if it can get to the first target.
