Here's Why I Sold Out of Nvidia and My Cash Levels Are Increasing
As rotation out of the Magnificent Seven continues, the market has a big problem.
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A sell-the-news reaction to Nvidia NVDA, combined with poor pending home sales and more talk about tariffs, triggered selling after a positive open. The Nvidia report was fine, but AI is now a mature theme, and there isn’t much interest in chasing an earnings report when it is so well anticipated. Overall breadth is 3,600 gainers to 5,600 decliners, and the Nasdaq 100 QQQ and Magnificent Seven MAGS names are the laggards.
I sold part of my Nvida last night and the remainder in the premarket on Thursday. While Nvidia still has an attractive valuation, I don’t see the likelihood of positive momentum in that chart. I’d consider a rebuy at lower levels.
The technical problem with the action lately is that early strength is being sold. We have not had any strong closes recently, and there have been consistent intraday pullbacks. Dip buyers have no resolve, and when they do appear, they have very short time frames.
The biggest problem for the market right now is uncertainty. This tariff issue is very murky, and it is not at all clear whether it is just a negotiating tactic or whether it will actually be imposed before a deal is eventually made. In addition, the rally in bonds is an indication of concerns about economic growth. Inflation is still an issue, too, but there is great uncertainty there as well.
I’ve reduced a few positions, but primarily, I’m just trying to protect capital without overreacting to random volatility. I’m seeing very few good technical setups right now, so my cash levels are increasing.
I continue to watch for indications of a stronger rotation out of the Mag 7 and into other areas of the market, but it has been extremely choppy and sloppy, and the Russell 2000 IWM is not cooperating.
There is some rebound developing as I write, but it is tough to trust, especially since we have not seen a strong finish in a while. Xeris Biopharma XERS continues to be my best trade and will have earnings next Thursday morning.
At the time of publication, Rev Shark was long XERS.
