Jim’s Notes – Waiting on NVDA

Moving the Market – May 21st

The markets remain mixed as investors seem to be waiting on NVDA’s earnings. They will have to wait one more day, but the financial stations couldn’t stop the conversations. Since I am not a speculator we will see what the news holds on Wednesday after the close. The NASDAQ, SP 500, and DIA closed slightly higher, with software, transports, small caps, and energy closing lower. It was another day without economic data in the headlines as investors continued to look to the next piece of news to determine the next action. For the fourth day, we traded essentially in place. The Fed was out in force with the consensus being they will be restrictive with interest rates until inflation shows signs of declining again. On the other side… their actions with liquidity, the actions speak volumes as they continue to keep banks solvent… at least until the election. The intraday actions were a low to high day with the uptrend still in play. Precious metals paused with some industrial metals AA moving higher. Financials posted some upside moves with BAC leading the upside move. AAPL, GOOG, and MSFT all added to the upside moves of late. AMZN tested the 50-day MA and bounced. TSLA gained 6.6% on progress in China. IYT fell 1.9% as it tests the May lows. All said it was a day of modest activity as we take what the markets offer and manage the risk accordingly.

The major indexes closed the day higher with modest gains on the major indexes. The focus remains on the Fed and earnings. Utilities, financials, and consumer discretionary were the leading sectors. The direction short term is higher as we bounced off the April lows to new highs The NASDAQ closed up 0.2%, DIA was up 0.1%, and the SP500 was up 0.2%. The major indexes closed higher on the day. The SOXX was down 0.3%. Small Caps (Russell 2000) were down 0.1%. The ten-year treasury yield was 4.41% down 2 bps for the day. Crude Oil (USO) was down 0.7%. (UGA) was down 1.0%. Natural gas (UNG) was down 1.6%. The dollar was flat. Plenty to deal with moving forward as we manage our money and emotions relative to the current environment.

Wednesday Outlook: Broad indexes await more economic data and NVDA earnings. New highs in the large-cap technology stocks and the NASDAQ. Watching the leaders and the laggards relative to money flow… seeing some interesting developments short term that are worthy of tracking moving forward. The economic data would point more to defensive or value stocks versus growth which have led the last five weeks… thus, we are tracking that discrepency. Remember the facts will eventually matter until then you follow the trend. 1) Watching the dollar, gold, interest rates, and crude oil. Commodities are seeing some rotation and volatility. DBA was up the last two days to bounce off the lows. 2) Mega caps have been lagging, MSFT, GOOG, and AAPL are leading. 3) QQQ hit new all-time highs. 4) EFA and EEM continue in their uptrends and international markets move higher. 5) SOXX moved near the March highs. 6) XLF, KBE, KRE, and KIE tested their breaks higher. 7) XLY is lagging showing a slowdown from the consumer. Looking for a follow-through to the upside move on Tuesday.

Chart of Sectors: The scatter chart below shows the activity of the sectors relative to the S&P 500 index. The red down trendline was broken back to the upside. Watching how this unfolds moving forward. Leadership becoming clearer of late.

Charts to Watch: See Notes on “Reality of the Markets”

Headlines Worthy of Note:

TSLA bounced Tuesday on the progress update on the electric semi-truck and China. There was also the headline on Elon Musk’s compensation package from the board.

Target releases thousands of deals to “help” consumers with inflation… their focus is on grocery items as well as other necessities. TGT has been in a battle with Walmart relative to market share. They are due to report Q1 earnings May 22nd. Question: If Target is cutting prices how does that impact their profits looking forward? $156 is key support. The chart is currently in a downtrend from the March highs.

Nvidia is trading near an all-time high and the ‘rumor’ on the street is they are going higher. I am not in the habit of investing in rumors or speculation for that matter. They are also ready to announce their Q1 earnings on May 24th. Question: Does NVDA produce another beat-and-rise report? If so, the stock could move up 10+% on the announcement. The Chart is currently in an uptrend from the April lows with the March highs next resistance point.

Quote of the Day: “It’s easy to make a buck. It’s a lot tougher to make a difference.” — Tom Brokaw.

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