Bulls Hope Nvidia Earnings Can Reverse a Painful Correction
The market action is now verging on panic though some good news from the AI giant can offer some support.
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The market action was a little panicky on Tuesday morning as stocks tumbled for the third day. There was no support until around midday, when a few hearty souls did a little bit of buying. However, they didn’t stick around, and there was another weak finish.
Most of the damage was in growth stocks FFTY, the Magnificent Seven MAGS, Bitcoin-related semiconductors SMH and technology names. The DJIA actually managed to finish in the green, and the Russell 2000 IWM had a little relative strength with a small loss of 0.4.
Once again, breadth was negative, but it was not extreme with about 4,400 gainers to 5,200 decliners, though there were over 500 new 12-month lows.
It may not feel like it, but there continues to be some rotational action as money flows out of growth names and the Magnificent Seven. However, it is very inconsistent, and there isn’t any real key leadership other than some defensive stocks. Even Walmart WMT managed to back a bit as it is viewed as a play on economic weakness.
While the stock market struggled, bonds were very energetic as interest rates continued to fall on economic worries. There was some concern that tariffs might be inflationary, but now the worry has shifted to economic slowing.
It is a mess out there with a lot of broken charts and downside momentum. Some optimistic bulls are hopeful that Nvidia’s NVDA earnings report on Wednesday afternoon will be strong enough to put some support under technology names again. The bullish thesis is that the unwinding of momentum is now quite extreme and that Nvidia will help to calm some nerves. There are oversold conditions, a high level of pessimism, some decent support, failing interest rates, lower oil, a weak dollar and strength in China and Europe.
It has been a very painful correction, and there isn’t much optimism right now, but that may be a good thing.
Have a good evening. I’ll see you tomorrow.
At the time of publication, DePorre had no positions in any securities mentioned.
