Market On Open - Friday 25 August

DISCLAIMER: This note is intended for US recipients only and, in particular, is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security, or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.

If It Was Easy, Anyone Could Do It

Wednesday after the close, one of the most important companies on the planet printed an earnings beat so savage that you now have folks bandying around price targets north of $1500 for a stock that civilians declared insanely overpriced at $450.  Nvidia said in May that it would bring in a vertigo-inducing $11bn of revenue in its July quarter, but in practice delivered a direct-to-Moon-orbit ascent of $13.5bn.  That's a 100% growth rate from the same quarter last year.  They also said that next quarter they will deliver $16bn revenue, which would be 170% growth on the same quarter a year ago.  As we noted in our Nvidia Earnings Review note yesterday, this kind of spending by enterprise customers is a clear signal of a tech capex cycle spinning up, which is likely to benefit the whole tech sector, and with it the tech-heavy Nasdaq and S&P500 stock indices.

So what happened Thursday?

Tech earnings moonage?  Well, the Nasdaq dumped, of course!  The S&P followed suit and the Russell 2000 and Dow both joined in later in the day for a collective miseryfest.  If ever there was a lesson to watch price first and fundamentals second, yesterday was that lesson.

All is not lost however.  If you look at the index behavior yesterday, they just retraced prior moves up.  Nothing about yesterday is yet a tell of a market selloff, just a retracement of the move up from Friday's spike lows.

Here's what happened in the Nasdaq yesterday.

And here's the S&P.

Yes they are two different charts.  

Technically then that is a Wave 2 down from Monday's Wave 1 up, and if that pattern continues we may see a Wave 3 up in each index on the way.  Today we have the talking heads from Jackson Hole which we assume will be a volatility-fest as always; Monday we will start to see which way the wind is really blowing.

OK.  Let's get to the action.

The Meat In The Sandwich

For our paying members only we now walk through the shorter- and longer-term outlooks for the S&P500, the Nasdaq, the Dow and the Russell.  

We also include more detailed Cestrian staff personal account trading plans in our charts - these are disclosures rather than commandments, we include them to (1) clarify our own thinking and (2) to help explain what we think about the direction of markets. Paying Inner Circle members can reach out in Slack anytime to discuss.  You will, of course, make your own decisions as to how to use our charts.