No not exactly. So starting early last week, I mentioned the entire market was overbought and due for a short-term sell-off. Just a small 2-4% pullback. I gave three big reasons for why that was the case.
We indeed saw about a 2.4% pullback on Thursday from the peak. And then today that extended to around 2.6%.
Since Nvidia is correlated with the market, it is impacted by that move. And indeed Nvidia also sold off from $130 to a low of $123. I was expecting closer to $115 to $120 for a low point. But it outperformed.
If you read last night’s post, there’s a section on Nvidia there. I outline my expectations for earnings there.
The tl;dr of it is this. It’s nearly impossible to forecast what Nvidia is going to do after earnings as we can’t know what the company is going report ahead of time. No one really has that information. And what’s more, we can’t know how the market is going to react. Recently it has been nothing but positive reactions but eventually we’re due for a negative reaction.
However, while we can’t predict how the stock will react on earnings, what I do feel confident in forecasting is that there will be a revision to the mean either way.
If Nvidia drops immediately after earnings, it’s going to erase those loses and rally all the way back to its highs to fill the earnings gap.
If it breaks out after earnings, then just like we saw after last quarter, it will likely give back all of its earnings gains.
In most cases, earnings is a near-term phenomenon. The era of gap and run for Nvidia is probably over now due to valuation. Sure we’ll get a surge after earnings, and it may go up massively. But there will be an opportunity down the line to purchase it near its pre-earnings price. Just like investors were able to buy it at $90-$100 a few weeks ago.
This happens with a lot of stocks that are in the process of making new highs.
Marvin Esch
August 27, 2024 7:24 am
Perfect, QQQs really looked they wanted to go to low 470, high 460. I have MU and PLTR on my watchlist, and they are definetly giving back gains of this run up. Dont know if this is part of your skillbook, but will you analyse the earnings report of Nvidia?
Regarding the SPY, I think how Nvidia responds to earnings will bear that out. I don’t think we’re going to see the NASDAQ-100 (QQQ) rally and the SPY form a double-top. More likely what we’ll see is a double-top breakout to fresh all-time highs for the SPY and the QQQ playing catch up.
And even if the Nvidia winds up sell-off which in turn leads to the QQQ to pair back, we’re still a lot more likely to see an ultimate double-top breakout. The chart will kinda of look a like an inverted head and shoulders continuation type pattern.
There is the possibility, as I mentioned on Sunday night for a double-correction to happen. We’ve seen that sort of thing happen a few times over the past several years. But I think that’s the rare/unlikely scenario. You can read about that here:
I used to do very detailed earnings analysis in the past and publish forecasts. But over the years what I’ve learned is this. Financial analysts at the primes usually do a pretty good job at putting together fairly decent and reliable forecasts which are widely made available. So no point in a duplication of efforts. But more importantly, it’s better to focus on the longer-term outlook than any particular quarter. Like the ones who are going to crush it in Nvidia are those who buy and simply hold their position for a few years.
That’s where I’ll be spending my time. It’s on the multi-year outlook and the fundamental analysis of the company. That info will published in the Nvidia tab under the stock menu button of the website.
Alright thanks, looking forward to it.
Personally I’m especially interested in the risk of the cyclical nature of the business and how it plays out. I know that Nvidia sees its productline more than an ecosystem of hard- and software, but I can’t see them sustaining revenue like Microsoft or Apple. Also the limits of the monolithic chip design. But I’m drifting away.
Looking forward to your read everything when it’s done.
“Financial analysts at the primes usually do a pretty good job at putting together fairly decent and reliable forecasts which are widely made available.”
Sorry for dumb question, but where are these available?
All over the place. So the easiest way to gain direct access would be through Bloomberg terminal or factset. But those are for a lot more advanced investors.
Instead, you can usually get them by subscribe to any number of website that make them available.
They do make for dense reading and in most cases, you can get the reports summarized in the financial press.
For example, Joseph Moore covers Nvidia at Morgan Stanley. If you’re Morgan Stanley client, you’d get the full report for free. But usually they’re circulated in the financial press and people write about them. You get the tl;dr. It depend on how much research depth you prefer.
But if you wanted to find them, what I would do is simply look up who covers Nvidia at each of the major primes Morgan Stanley, Goldman Sacs, BofA Merrill etc and then either subscribe to a research publication that has those reports.
You’ll also get a summary of estimated at sites like Google or Yahoo finance.
By
/ August 26, 2024 
Are you saying NVDA will likely increase before earnings then tank after it reports, and later recover?
No not exactly. So starting early last week, I mentioned the entire market was overbought and due for a short-term sell-off. Just a small 2-4% pullback. I gave three big reasons for why that was the case.
We indeed saw about a 2.4% pullback on Thursday from the peak. And then today that extended to around 2.6%.
Since Nvidia is correlated with the market, it is impacted by that move. And indeed Nvidia also sold off from $130 to a low of $123. I was expecting closer to $115 to $120 for a low point. But it outperformed.
If you read last night’s post, there’s a section on Nvidia there. I outline my expectations for earnings there.
The tl;dr of it is this. It’s nearly impossible to forecast what Nvidia is going to do after earnings as we can’t know what the company is going report ahead of time. No one really has that information. And what’s more, we can’t know how the market is going to react. Recently it has been nothing but positive reactions but eventually we’re due for a negative reaction.
However, while we can’t predict how the stock will react on earnings, what I do feel confident in forecasting is that there will be a revision to the mean either way.
If Nvidia drops immediately after earnings, it’s going to erase those loses and rally all the way back to its highs to fill the earnings gap.
If it breaks out after earnings, then just like we saw after last quarter, it will likely give back all of its earnings gains.
In most cases, earnings is a near-term phenomenon. The era of gap and run for Nvidia is probably over now due to valuation. Sure we’ll get a surge after earnings, and it may go up massively. But there will be an opportunity down the line to purchase it near its pre-earnings price. Just like investors were able to buy it at $90-$100 a few weeks ago.
This happens with a lot of stocks that are in the process of making new highs.
Perfect, QQQs really looked they wanted to go to low 470, high 460. I have MU and PLTR on my watchlist, and they are definetly giving back gains of this run up. Dont know if this is part of your skillbook, but will you analyse the earnings report of Nvidia?
To add: how do you feel about a spy double top already emerging? or is it less relevant because chips lead tech and tech leads spy?
Regarding the SPY, I think how Nvidia responds to earnings will bear that out. I don’t think we’re going to see the NASDAQ-100 (QQQ) rally and the SPY form a double-top. More likely what we’ll see is a double-top breakout to fresh all-time highs for the SPY and the QQQ playing catch up.
And even if the Nvidia winds up sell-off which in turn leads to the QQQ to pair back, we’re still a lot more likely to see an ultimate double-top breakout. The chart will kinda of look a like an inverted head and shoulders continuation type pattern.
There is the possibility, as I mentioned on Sunday night for a double-correction to happen. We’ve seen that sort of thing happen a few times over the past several years. But I think that’s the rare/unlikely scenario. You can read about that here:
https://sam-weiss.com/charting-the-course-outlining-the-near-and-intermediate-term-risks-and-potential-headwinds-that-lie-ahead/
I used to do very detailed earnings analysis in the past and publish forecasts. But over the years what I’ve learned is this. Financial analysts at the primes usually do a pretty good job at putting together fairly decent and reliable forecasts which are widely made available. So no point in a duplication of efforts. But more importantly, it’s better to focus on the longer-term outlook than any particular quarter. Like the ones who are going to crush it in Nvidia are those who buy and simply hold their position for a few years.
That’s where I’ll be spending my time. It’s on the multi-year outlook and the fundamental analysis of the company. That info will published in the Nvidia tab under the stock menu button of the website.
Alright thanks, looking forward to it.
Personally I’m especially interested in the risk of the cyclical nature of the business and how it plays out. I know that Nvidia sees its productline more than an ecosystem of hard- and software, but I can’t see them sustaining revenue like Microsoft or Apple. Also the limits of the monolithic chip design. But I’m drifting away.
Looking forward to your read everything when it’s done.
“Financial analysts at the primes usually do a pretty good job at putting together fairly decent and reliable forecasts which are widely made available.”
Sorry for dumb question, but where are these available?
All over the place. So the easiest way to gain direct access would be through Bloomberg terminal or factset. But those are for a lot more advanced investors.
Instead, you can usually get them by subscribe to any number of website that make them available.
They do make for dense reading and in most cases, you can get the reports summarized in the financial press.
For example, Joseph Moore covers Nvidia at Morgan Stanley. If you’re Morgan Stanley client, you’d get the full report for free. But usually they’re circulated in the financial press and people write about them. You get the tl;dr. It depend on how much research depth you prefer.
But if you wanted to find them, what I would do is simply look up who covers Nvidia at each of the major primes Morgan Stanley, Goldman Sacs, BofA Merrill etc and then either subscribe to a research publication that has those reports.
You’ll also get a summary of estimated at sites like Google or Yahoo finance.