Nvidia… Amazing Numbers, Horrific Reaction
The S&P continues to struggle gaining bullish traction living below its 20 SMA and now 50 SMA on the daily timescale. The trend is confidently down in the short term.
From peak to trough, the S&P has fallen about 5.63% which is in line with the magnitude of a garden variety pullback.
On average, we must remember that markets typically have a 5% correction three times a year.
So while notably different and perhaps more uncomfortable than the clean uptrend off of the April lows, this is normal.
Pullbacks allow single stock leaders to take a break, build new bases, and setup new trades – or – allow new leaders to emerge as money flows elsewhere.
Nvidia Earnings
Nvidia released earnings after the bell on Wednesday and continued to prove that they deserve to be the most valuable company on the planet.
- EPS – Forecast $1.26 | Actual $1.30 (3.17% beat)
- Revenue – Forecast $54.9B | Actual $57B (3.83% beat)
- Gross Margin – 73.4%
- Q4 Guidance – Forecast $62.17B | Actual $65B (4.55% raise)
These numbers are akin to that of a literal money printing machine. So hats off to Jensen for another amazing quarter.
What matters more for us as traders and investors though is the markets reaction. Headed into Thursday’s open, NVDA was up more than 5% in post and pre market trade. As of the close? Down 3.81%.
This followed, to the tee, the reactions we’ve been seeing recently from the major AI players on earnings. Great numbers, but horrible market reaction.
This type of activity usually happens late market cycle, not early market cycle.
This isn’t to say NVDA should be avoided, but check in with your timeframe.
Long term investors should build confidence on the earnings report and let the weekly chart be the guide. Momentum traders should look to play both ways in the volatility instead of only up, and keep an open mind the the daily chart getting sloppy.
GOOGL Gets Uncle Warrens Blessing
The recent AI leaders have been taking a back seat post earnings. The new AI leader that appears to be emerging after a rough start with Bard and early Gemini issues is Google.
Gemini 3.0 and more importantly the implications of their ASIC TPU for inference is now taking the spotlight.
Compare the look of NVDA, PLTR, MSFT, AMD to GOOGL below. The charts speak for themselves.
The Fed & Data
This weeks volatility comes with a total flip flop from the Fed.
Early in the week, the Fed Henchmen came out and talked up the threat of inflation and how policy was “barely restrictive.” Hammack literally said this.
A generally hawkish tone was in the air, especially after the FOMC minutes were released, where for the first time in a long time there was not a consensus vote.
Lisa Cook said Thursday morning there is a, “increased likelihood of outsized asset price declines.”
Later in the week, the Fed Henchmen flip with Williams on Friday saying, “Financial markets set asset prices, the Fed does not have a view on whether they are too high or too low.” … “There’s room to cut rates again in the near term as the labor market softens.”
Collins then states, “Over time, I expect we will lower rates further.” Miran chimes in with, “Implications of yesterday’s data ‘obviously dovish’.”
Rate cut odds went from 60% pause on Thursday to 70% cut on Friday.
This instability is causing a double whammy, with major repricing of the small cap side of the market, which in the absence of Fed volatility would typically act as an anchor for the broader S&P cohort amid AI volatility.
The next major indication we should be looking for is the CPI report, but as of Friday that has now been postponed to release December 18th, after the December 10th FOMC meeting.
As always, the charts light the way, so lets take a look through things relevant to this upcoming weeks worth of trade.
Trade Brigade Live Squawk
Make the most of the final trading quarter with live intra-day commentary on breaking opportunities.
Check out this recording for a taste of what each morning session is like: 07/09 Live Squawk
Onboarding support will be available through the evening and Monday morning starting at 6:30am EST before the 8am premarket-prep kick-off.
Broad Market Analysis
SPY – Weekly
Bears have a lower high and lower low on the bar to bar count, but still just working with a pullback from the ATH. Support coming in on Friday with the lower wick bouncing the quad bottom low and 20SMA.
SPY – Daily
One of the main things to watch this week will be the 663.25 level. If price consolidates underneath, we have a classic bear flag forming with prior lows now acting as new found resistance.
Of note is the undercut and rally from the Friday morning session on Thursday’s low. Main takeaway is not wanting to get ‘short in the hole’ and rather wait for the break of the flag low and the lower high to be set underneath.
If price is able to move over the 663.25 level, the look should be for a lower high on the weekly perhaps under the 647 bear engulfer high to set a right shoulder in the H&S formation.
Price outside of the orange guardrails is the most informative outcome for trend.
SPY – Hourly
The name of the game based on supporting evidence is to still be looking for lower highs. The two situations that would have me feeling bullish are the recapture of 674 or the look below and fail on 652.5 as seen in light gray.
Market Internals
At the exchange level, buyers snapped back on Friday, but only in about an equal but opposite magnitude to that of the sell on Thursday.
This paints the picture that being short into the low at 652.5 doesn’t make much sense until the break actually happens. Sellers ‘ran out of bullets,’ on the low, but bulls don’t appear to be accumulating as the market was sideways ahead of Thursday.
Market Profile
Biggest red flag here is the failure of bulls to rotate through thin structure in the single prints from Thursday’s break. Stronger buyers would have no issue moving through the lack of overhead supply.
The M period spike also didn’t immediately cause short covering which makes me think sellers are emboldened on the low. Perhaps out of bullets to sell more inventory, but not overly fearful.
HYG – Junk Bonds
Junk is offering a positive divergence again. One of the main reasons why getting short dead on the low without confirmation here is a bad idea.
If you want the full take, including all of the nuance of breadth, risk appetite and much, much more, check out the weekend episode here:
Economic & Earnings Calendar
CPI to be delayed as noted above.
Top watches: ZM, BABA, DELL, CLKS, ZS
Swing Stock Scans
ATI – Weekly / Daily
High and tight consolidation post earnings gap up. Undercut and rally on Friday back over Thursday low. If price can stay in the balance range and attempt to breakout over the 103.50 level, the ATH target around 116 is the target.
CAT – Daily
Great looking flag at all time highs. Looking for a move over the trendline or over the ATH pivot to continue into blue sky. Not interested if price spends more time below 542.5 area.
ILMN – Daily
Cup and handle breakout now offering a continuation flag over the 20 SMA. If price can clear the 125.2 area and prior overhead supply at 130.75, prior pivot highs can act as target. Not interested if this consolidation starts to break down below the daily 20.
PLD – Daily
Not my favorite to be playing REITs as the XLRE is completely flat for the last 7 months, however this appears to have relative strength to the sector as well as the market. Over 126.65 (historical level) can see 132.25 potentially. Needs to balance over 121.75.