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Nvdia Sparks Market Rally
www.oneoption.com
The market is back above the 50-day MA this morning and tech stocks are bouncing.
PRE-OPEN MARKET COMMENTS THURSDAY – The price action since the Fed rate cut has been bearish and the market breached the 50-day MA this week. Nvidia posted solid growth numbers and the CEO said that from his perspective, there is no AI bubble. The stock has big overnight gains, but it is still well below the high from October.
Tech stocks have been particularly weak and high fliers have had their wings clipped. AI, quantum computing and crypto stocks are likely to bounce today. There has been steady selling in tech and I suspect that this will only be a bounce and that the highs from last month will not be challenged for these stocks.
The FOMC Minutes yesterday were hawkish in my view. Half of the members were reluctant to cut in October and they do not see the need for a December rate cut.
The BLS released the jobs report for September and it showed that 116K new jobs were created. I don’t trust that number at all, but who cares what I think. Initial jobless claims came in at 220K, right where it has been.
WMT released earnings this morning. Same store sales were up 4.5% and earnings beat expectations. Other retailers like HD and TGT did not fare so well this week.
What does all of this mean? The market is back above the 50-day MA and AVWAPQ. We are likely to see a lot of short covering and that is going to fuel the move higher. I have day traded from the short side, primarily to hedge long positions. One of my trading axioms is not to swing short in November and December. Now you know why. Year end strength is an incredible force and after being humbled by it once, I learned my lesson.
I don’t believe that the market will be off to the races. It will do well to challenge the high of the year and there will be plenty of chop the remainder of the year. I believe the price action will be similar to what we saw in November and December last year.
I have put credit spreads and naked puts that will be expiring tomorrow. Given the rally this morning, I will be looking for opportunities to sell more. The market doesn’t have to rally for these to work, it just can’t tank and the odds of that happening just got smaller after this news. This strategy will generate nice income during uncertain times and they will expire in December.
From a day trading standpoint I would watch some of the beaten down tech stocks. They should bounce today and there should be some short covering. For the remainder of the year I believe there will be day trading opportunities on both sides and the one you choose will be a game time decision. The intraday swings have been huge and that will remain. Buyers and sellers have been active.
Support is the 50-day MA and resistance is $674 (previous resistance from Oct 9).
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