These Are Not Our Father's Markets or Charts

Follow @MrTopStep on Twitter and please share if you find our work valuable!

Every week, MrTopStep invites traders to an “Own the Close” contest where the closest guesstimate where the SPX will settle on Friday’s 4:00 cash close.

The winners get a free week's access to the MrTopStep Chat and trading tools. Enter your guess now!

Our View

The markets have really slowed and volumes have dropped in front of today's NVDA earnings. 

When I look at a wider view of the ES chart, I see several lows and no follow-through. The August 20 low at 5607.75, the August 21 low at 5613.50, the August 23 low at 5603.00, and yesterday’s low at 5611.50. Only one day — August 22 — did the ES break down through the 5,600 figure down to 5582.75. What I see is a big 60-point back-and-fill pattern.

Will Nvidia earnings beat expectations? Will the ES and NQ explode to the upside? Or will they sell the good news? What happens if NVDA does not meet expectations and tumbles taking the rest of the markets for the ride? Or will the stock fall and bounce? 

The data analytics firm ORATS showed that options pricing anticipated a move of 9.8% in NVDA shares and that the report could prompt more than a $300 billion in swing in value, which is a larger-than-expected move over the last 3 years. It’s also well above the stock's average post-earnings move of 8.1% over that same period and the largest expected earnings move of any company in history.

I don't know how this can be a good thing, but if you add up the Dot-com companies, the market capitalization of all the tech companies was $47 billion in February of 2000. Going into today's earnings, NVDA’s market cap is $3.16 trillion. 

I know that I say I have been part of every market crash since 1980, but the Dot-com bubble was telegraphed. It started in 1995 and by late-1999, we knew something was going to happen. It started going up everyday, day after day, while several tech companies were IPOing or just did an IPO.

I am not saying we are going into a tech bubble, but I think everyone should be concerned about the concentration of a handful of companies making up ~30% of the capitalization of the markets. If something goes wrong, it could create a real volatile situation.