𝗠𝗮𝗿𝗸𝗲𝘁 𝗹𝗲𝗮𝗱𝗲𝗿 𝗡𝗩𝗗𝗔 𝗲𝗮𝗿𝗻𝗶𝗻𝗴𝘀 𝗿𝗲𝗽𝗼𝗿𝘁 𝗮 “𝗡𝗼𝗻 𝗲𝘃𝗲𝗻𝘁”

𝗠𝗮𝗿𝗸𝗲𝘁 𝗹𝗲𝗮𝗱𝗲𝗿 𝗡𝗩𝗗𝗔 𝗲𝗮𝗿𝗻𝗶𝗻𝗴𝘀 𝗿𝗲𝗽𝗼𝗿𝘁 𝗮 “𝗡𝗼𝗻 𝗲𝘃𝗲𝗻𝘁” 𝗦𝘁𝗼𝗰𝗸𝘀 𝗵𝗮𝘃𝗲 𝘀𝘁𝗮𝗴𝗲𝗱 𝗮𝗻 𝗶𝗺𝗽𝗿𝗲𝘀𝘀𝗶𝘃𝗲 𝗿𝗲𝗰𝗼𝘃𝗲𝗿𝘆, 𝗲𝗻𝗱𝗶𝗻𝗴 𝗮𝘁 𝗼𝗿 𝗻𝗲𝗮𝗿 𝗿𝗲𝗰𝗼𝗿𝗱 𝗵𝗶𝗴𝗵𝘀 𝗱𝗲𝗽𝗲𝗻𝗱𝗶𝗻𝗴 𝗼𝗻 𝘁𝗵𝗲 𝗶𝗻𝗱𝗲𝘅.

The gains came off the near 10% correction in early August and were supported by a still expanding economy, positive earnings growth, and a Fed that is indicating that it’s ready to ease.

Lofty expectations are a headwind for the tech heavyweights, which relinquished leadership last month. At the same time, the broadening earnings growth is helping the laggards make a comeback, as the recent volatility worked to their advantage.

The Tech sector seems to be losing some of its momentum, as comparisons get tougher and valuations are full. As a result, the S&P 500 (+18.4% YTD) has now pulled slightly ahead of the Nasdaq Composite index (+18.0% YTD) as to gains on the year.

𝗟𝗮𝘀𝘁 𝘄𝗲𝗲𝗸 𝗮𝗹𝗹 𝗲𝘆𝗲𝘀 𝘄𝗲𝗿𝗲 𝗼𝗻 𝗡𝗩𝗜𝗗𝗜𝗔, 𝘁𝗵𝗲 𝗰𝗹𝗲𝗮𝗿 𝗹𝗲𝗮𝗱𝗲𝗿 𝗶𝗻 𝗔𝗜 𝗱𝗲𝘃𝗲𝗹𝗼𝗽𝗺𝗲𝗻𝘁, 𝗮𝗻𝗱 𝘁𝗵𝗲 𝗲𝘅𝗰𝗶𝘁𝗲𝗺𝗲𝗻𝘁 𝗶𝘁 𝗵𝗮𝘀 𝗴𝗲𝗻𝗲𝗿𝗮𝘁𝗲𝗱.

NVIDIA now represents over 6% of the S&P 500 and has a market capitalization of $3.1 trillion, second only to Apple. Given the stock’s significant influence on the index and its 150% rally this year, the company’s quarterly earnings report was one the most anticipated releases of this earnings season.

For all the excitement, NVIDIA’s results did not change the market narrative, nor did it trigger a big reaction across the tech sector. But the results highlighted a headwind that the mega-cap tech winners face: that of lofty expectations. NVIDIA exceeded consensus estimates on second-quarter sales, earnings, and third-quarter guidance, but it did so without blowing them away to the same extent that it had in prior quarters.

Because of tough comparisons from a year ago, growth may inevitably slow in quarters ahead for NVIDIA, and more broadly, for the Nasdaq Generals. Those companies, that have led this year’s gains, have experienced relative strength deceleration. Together with elevated valuations, market heavyweights could spend some time consolidating and retesting, possibly taking a back seat for a change.

𝗨𝗻𝗹𝗶𝗸𝗲 𝘁𝗵𝗲 𝗳𝗶𝗿𝘀𝘁 𝗵𝗮𝗹𝗳 𝗼𝗳 𝘁𝗵𝗲 𝘆𝗲𝗮𝗿, 𝗮 𝗯𝗿𝗼𝗮𝗱𝗲𝗿 𝗿𝗮𝗻𝗴𝗲 𝗼𝗳 𝘀𝗲𝗰𝘁𝗼𝗿𝘀 𝗮𝗻𝗱 𝘀𝘁𝗼𝗰𝗸𝘀 𝗮𝗿𝗲 𝗻𝗼𝘄 𝗱𝗿𝗶𝘃𝗶𝗻𝗴 𝘁𝗵𝗲 𝗰𝘂𝗿𝗿𝗲𝗻𝘁 𝗿𝗮𝗹𝗹𝘆, 𝗶𝗻𝗱𝗶𝗰𝗮𝘁𝗶𝗻𝗴 𝗮 𝗴𝗿𝗮𝗱𝘂𝗮𝗹 𝘀𝗵𝗶𝗳𝘁 𝗶𝗻 𝗺𝗮𝗿𝗸𝗲𝘁 𝗹𝗲𝗮𝗱𝗲𝗿𝘀𝗵𝗶𝗽 𝗶𝘀 𝘁𝗮𝗸𝗶𝗻𝗴 𝗽𝗹𝗮𝗰𝗲.

The next two-month stretch that will lead to the November election day has historically been seasonally challenging for stocks, with bigger daily fluctuations and lower returns.

The potential for volatility to reemerge highlights the importance of technical trading discipline.

In any case, closely monitor the technicals and “Trade What You See, Not What You Think”.

Stay tuned,

𝐇𝐚𝐫𝐫𝐲 𝐁𝐨𝐱𝐞𝐫,  𝐕𝐞𝐭𝐞𝐫𝐚𝐧 𝐓𝐫𝐚𝐝𝐞𝐫, 𝐄𝐱𝐩𝐞𝐫𝐭 𝐓𝐞𝐜𝐡𝐧𝐢𝐜𝐚𝐥 𝐌𝐚𝐫𝐤𝐞𝐭 𝐀𝐧𝐚𝐥𝐲𝐬𝐭, 𝐅𝐨𝐮𝐧𝐝𝐞𝐫 𝐨𝐟 𝐓𝐡𝐞𝐓𝐞𝐜𝐡𝐓𝐫𝐚𝐝𝐞𝐫.𝐜𝐨𝐦