Everything AI
Last week, the spotlight was on Nvidia's earnings, announced after hours on Wednesday. Nvidia, a powerhouse to the artificial intelligence (AI) narrative, and its semiconductors enable the technology that drives innovations like ChatGPT. Their earnings report showed staggering growth, with revenue up by 265% to $22 billion compared to the same quarter last year. The sheer scale of this growth is nothing short of remarkable.
However, does this make me bullish on Nvidia today? The answer is no. While the growth story is undeniably impressive, I view participating in Nvidia at this juncture as entering the game late. I missed this trade, and do not have interest to participate at this late stage. As Jesse Livermore famously remarked in "Reminiscences Of A Stock Operator":
“One of the most helpful things that anybody can learn is to give up trying to catch the last eighth— or the first. These are the two most expensive eighths in the world”
I believe Nvidia is currently in its "last eighth," (or somewhere near it) and the heightened attention on the company only contributes to the prevailing sense of euphoria and greed within the US equities market.
S&P 500 Another All Time High Close
Despite the seasonal odds, the S&P 500 has surged +5% in February and is now up +6.7% for the year closing for another week at all time highs. This defies historical patterns, as the last two weeks of February traditionally rank at the bottom for returns over a two-week period dating back to 1928.
It appears as though there is "no stopping this train." Even moments of panic result in sharp but shallow pullbacks, swiftly followed by immediate recoveries. For the past two months, this weekly note has emphasized monitoring three key correction criteria. However, all three criteria have yet to be simultaneously triggered. I continue to monitor these criteria closely, as I speculate that once all three are met concurrently, the market could experience a significant reset of its recent advances. Until then, euphoria remains the dominant force, and as I often emphasize, it's key not to get lost in it.
In this week's note, I will provide updates and review the status of the correction criteria for the S&P 500. Additionally, I will introduce a new trade idea in the "Outside of US Equities" category, where I anticipate potential outperformance.
Unlock the full note every Sunday and receive out-of-cycle updates whenever key market criteria are triggered, along with trade ideas targeting to capture potential outperformance. Upgrade your subscription today with monthly and annual options available.
“Buy Fear, Sell Greed”
Next week the market passes the two month mark of operating in an environment defined by Extreme Greed. In the name of “buy fear, sell greed” a few notable sellers have emerged this year:
Jeff Bezos has divested $8.5 billion of Amazon stock.
Mark Zuckerberg has offloaded over $400 million of Meta stock.
Jamie Dimon executed a sale of $150 million of JP Morgan Chase stock.
Lisa Su has initiated selling AMD stock.
While it may appear inconsequential, it's worth noting that Jeff and Mark last sold shares in December 2021, almost coinciding with the previous all-time high in the markets. Jamie's sale of JPM shares marks his first since assuming the CEO position. As for Lisa, her business operates in the same semiconductor category that is propelling the world's endless AI capabilities forward.
What do they know?
Correction Criteria Assessment
The three correction criteria:
Price trades below the short duration moving average (20 day exponential)— signifying the loss of the short term uptrend
Breadth turns negative— more stocks make new lows versus new highs
A concluding momentum interruption