When Nvidia Rallies, It Sucks the Life Out of Everything Else
Breadth may still be improving, but what Nvidia does will be key.
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The Market
First, my apologies for not publishing an edition of Top Stocks last evening. But, quite frankly, the comments from today probably would have echoed last night’s missive.
Oh, maybe today was worse statistically because breadth was actually red, whereas yesterday it didn’t quite make it all the way to red. But let me remind you that we got overbought on Monday, and that might not apply to the Mag 7 because they live in a different world, but it applies to the 493. Now we must wait to cycle back to an oversold condition.
Let me report that the McClellan Summation Index is still heading up. The cushion, though, is thin. Probably thinner than an air mattress you’d sleep on while camping. A net negative of -500 (advancers minus decliners in the NYSE) will turn it right back down again. The chart is shown below.
But more than that, since NVDA peaked in early August and went sideways, it allowed the rest of the market to enjoy a great round of stock picking and group rotation. But once NVDA starts rallying as it did this week, it sucks the life out of the rest of the market. So basically, the market that you enjoyed for the last three months is over for now.
In mid-September, when NVDA came down to 170, I was a buyer. That move measures to the 204-205 area now. There is a chance it gets to 210 on this run, but that’s the area it should run out of gas for now (i.e. we’re close).
Two other charts of note. The Utes. They made their high nearly two weeks ago. I still think there is more to come on the downside. Watch that 90 area on (XLU) . If that breaks, I’ll be eyeing that 87-ish area.
Now that no one asks about (GLD) anymore, I’m ready to talk about it. Do you see how it bounced off that line today? I think within a matter of days, it gets oversold enough, perhaps for a bounce to fill that gap around 375-380. Don’t fall in love, it’s just a trade with a tight stop.
New Ideas
I should address Meta (META) since it has earnings tomorrow. I recommended it around 715, so we’ve got some money in it, and it’s got an 8-day win streak. I’d say take a little off the table, but as long as it doesn’t break back under 730-ish, I think it’s still okay. Earnings are a wild card, though.
We had a quick trade in the (ITB) ETF (home builders) a few weeks ago. But look at Pulte (PHM) and see that double bottom at 115? This has my interest. If the homies stabilize, that would be a positive.
Today’s Indicator
The McClellan Summation Index is discussed in full above.
Q&A/Reader’s Feedback
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I cannot in good conscience chase a chart like Garrett Motion (GTX), but it has done nothing wrong. There is support back at that line (15.50), so if it comes down there, I’d expect a bounce.
If we can ever get the 493 to move again, then Trane Technologies (TT) would be a candidate to break out over this 430 area. Might need the market to get oversold again.
Yes, the first thing I see when I look at the chart of DoorDash (DASH) is the potential for a head and shoulders top, but the neckline is up-slanting, which tends to be easier to break but not nearly as bearish as most would assume. As long as DASH stays over last week’s low around 245, I’ll give it the benefit of the doubt that this is just a consolidation. For now, I’ll say it’s trapped between support and resistance.
Kaiser Aluminum (KALU) trades so thinly that you can be so wrong in a heartbeat. My pony in the aluminum world has been Alcoa, as you may recall. It is slow and steady. That having been said, the 90-100 rule should apply here: 90% of the stocks that get to 90 will make it to 100.
The fact that Avis ( (CAR) ) has not been about to rally after that gap down in July has me concerned that it will not hold this 140 area on this trip down. If it breaks that 140 area, it would measure down to 110-120.
The good news for Keurig Dr Pepper (KDP) is that when it tagged 25, it hit its measured target. But now it has so much resistance overhead. My guess is, at some point, it makes a try for that 30-31.50 area, but it gets stopped there.
Viavi Solutions (VIAV) is a nice chart with a measured target around 16-17. But it’s hard for me to like a stock that has hardly taken a breather since August. I like when patterns set up.
Valley National Bancorp (VLY) has a measured target around 12-13.
Whoever asked about Blue Owl (OWL) is trying to suck me into saying that the chart has tested its April low, so I like it now! I am inclined to think the stock has some work to do down here between 15 and 18, but unless it breaks 14.50-15 on a gap down, it’s probably seen the bulk of the decline.
I would not be surprised at all if Netflix (NFLX) bounced to 1150-1175. It’s feeling a little oversold down here. If it can’t get over 1150, I’d get quite concerned that the next trip down is to 1050.
AT&T (T) should not have broken 25, but it did. And then it snapped right back in. I would like to see it map out as I’ve drawn in blue over the coming months.
