The recent stalling out in most US Equity indices over the last week hasn’t taken away from the appeal of the current rally from early August lows. A bullish advance back to new all-time highs is still expected into mid-September ahead of any seasonal Fall correction. The Equal-weighted SPX has already pushed back to new all-time high territory coinciding with the breakdown in the US Dollar and Treasury yields, and Small-caps have started to kick into gear once again. Furthermore, market breadth remains constructive and sentiment is not yet bullish enough to mark a larger market peak. Cycles show strength into mid-September in both Equities and Treasuries before a selloff takes hold, and sectors like Financials and Consumer Discretionary have been instrumental in serving as a “tailwind” for Equity gains at a time when Technology has been a bit wobbly. Overall, unless NVDA, and by extension, Technology, starts to roll over in bigger fashion it looks right to stay bullish.
I’ll forego any market commentary tonight in favor of NVDA analysis given that SPX and QQQ both remain largely range-bound ahead of this week’s monumental earnings event out of NVDA post Wednesday’s close.
It’s not wrong to say that tomorrow’s NVDA earnings should be a critical driver for Technology along with the US Stock market given its representation among various ETF’s. NVDA now accounts for over 6% of SPX, the second largest holding behind AAPL.
Its expected post-earnings move forecasted by options implied volatility is expected to be roughly 9%, which could help this get close to $140 on the upside initially, or near $115 on a big miss, the latter target approximating a 38.2% Fibonacci retracement lower of its prior runup from August.
Technicals still make a strong case for a push back to new all-time highs for NVDA
Technically, I am expecting an upside breakout given the bullish combination of strong momentum, technical structure, and cycles into late September.
Daily charts show the constructive move back above former June 2024 lows which makes NVDA technically appealing and likely cements this pullback from early Summer into August lows as being a three-wave decline. (Thus, a move back to new highs is likely.)
NVDA has also exceeded the minor downtrend connecting June peaks from July peaks and has progressed much higher in recent weeks than the gains seen in the actual PHLX Semiconductor index (SOX) itself, retracing a Fibonacci 78.6%, vs 61.8% for SOX.
Despite six straight sessions of sideways congestion, not dissimilar from the major US indices, the path of least resistance remains higher given its sharp rebound from August lows three weeks ago.
While momentum remains somewhat “under pressure” on weekly charts given the strong selloff into early August, this failed to make a dent in the monthly momentum which continues to show a strongly trending upward bias based on MACD and remains well above its signal line.
Initial targets lie near $140.76 at June 2024 highs. However, it’s likely that this level is exceeded which should pave the way for a push up to $150-5. This latter space represents a few different projections from prior price swings and could allow for resistance on gains into mid-September.
NVDA
NVDA vs. SPY still shows “unfinished business” given the lack of confluence of DeMark-related monthly “Sells”.
Interestingly enough, the monthly relative chart of NVDA vs. SPY still looks to push higher given a lack of any counter-trend exhaustion which might signal some stalling out and/or trend reversal in the near-term.
This same chart showed a plethora of counter-trend signals in late 2021 which effectively marked a relative high for NVDA vs. the SPX nearly three years ago.
However, at current levels, these signals are conspicuously absent, and require another push back to new high territory into September which could bring about the presence of a TD Combo “sell” (13 Countdown exhaustion on monthly charts).
Overall, given the lack of any exhaustion at present, I’m willing to expect that NVDA can still outperform the SPY over the next month and should successfully push back to new record highs.
NVDA / SPY
NVDA Cycle composite shows strength into late September ahead of a decline through the Election
When breaking down the cycles that make up NVDA’s last dozen years, it’s important to initially start with the 80-day trading day cycle which is one of the most accurate for NVDA historically since 2007 in both strength and Bartel score, and has been prominently active for SPX as well over the last couple years.
This 80-day cycle has brought about above-average gains into mid-2020, gains in Spring and Fall of 2021, a decline in late 2021 which lined up with the peak in NASDAQ 100 index during November 2021. Furthermore, the cycle composite showed a decline in Spring of 2022 which extended down into early 2023.
When combining other cycles like the 94-day, the 318-day, and 111-day, this looks to bottom this week before turning up sharply into late September-early October. Thereafter, NVDA does look to weaken into the US Election and does not seem to begin trending up sharply again until January into next Spring.
It’s important to mention that any gaps which occur this week after earnings likely might not represent “the high” but just “a high” as open gaps tend to be associated with wave-3 patterns. Ideally, a gap higher to 140 area happens, and then some minor backing and filling before a push up to 150-5 which I’m eyeing closely for any evidence of stalling out.
Overall, given a lack of technical deterioration, strong momentum and bullish cycles, I am expecting a push up to new all-time highs. However, I do suspect that if/when NVDA reaches 150, there might be some stalling out/consolidation which begins either in late September or October and might show some downward pressure into the US Election. This is also consistent with my SPX view over the next 8-10 weeks.
NVDA Cycle Composite
Philly Semiconductor index has some work to do given early August decline
The decline in SOX into early August looks to have successfully held where it needed to, as this recent decline held the 2024 Spring lows on a weekly close along with the prior high from early 2022.
However, given that this has only recouped 61.8% of the prior decline from July and is not as strong as NVDA, more progress will be necessary to push even higher to help momentum start to improve.
The push into July peaks was accompanied by some negative momentum divergence, not unlike what happened to NVDA a few months back. However, ideally, a larger rally back is necessary before being able to project meaningfully higher.
I do feel that a NVDA earnings beat should carry SOX up to 5600. However, I cannot make the case for new all-time highs just yet, technically speaking. In the event that 5600 is exceeded, then SOX should rally up to 5931 to test July peaks. However, I feel that such a rally might not happen until post the US Election. Moreover, if/when SOX exceeds 5600, the area near 5931 should represent serious resistance.
Stocks like MU, LRCX, LSCC, RMBS, and INTC (the latter being a worst case example) have all lost more than 8% in the last month (INTC has been the worst performing member of SOX in the last month along with WOLF, both declining roughly 36%).
PHLX Semiconductor Index (SOX)
