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As I start my normal "Walk Down Main Street" on Monday night the three things that this market is going to be focused on couldn't be any clearer.
First, of course, is A.I.
In case you missed it, NVIDIA released their introduced its DGX GH200 AI Supercomputer. According to NVIDIA, this is a "New Class of AI Supercomputer Connects 256 Grace Hopper Superchips Into Massive, 1-Exaflop, 144TB GPU for Giant Models Powering Generative AI, Recommender Systems, Data Processing."
Let's be honest unless you designed the computer that was mostly gibberish... there was one thing that you and the rest of the market heard - A.I, causing a buying frenzy that has the stock trading more than 17% higher for the year when you include the 4% increase in shares before the market even opened on today.
To this, I say, "STOP THE MADNESS".
If you are one of the investors or traders that have NVIDIA in your portfolio this morning then be thankful and enjoy the ride.
If you don't, pull your finger off that "buy button" for just a moment and keep reading - there are a few things you need to consider first.
I always talk about the market being driven by math, and you're getting a lesson right now with NVIDIA and there are a few more to come.
In the name of time, I'll be brief. The markets are driven by cash, right?
Go one step further and you can determine that the cash in the market is rather finite. I have to remember this whenever I see a stock "go" like NVIDIA.
That's because the "finite" cash in the market just can't keep pushing this stock at breakneck speeds.
This is why you take your finger off the "buy button" right now.
According to the chart below, the stock has now exceeded what I refer to as a "Crescendo Top" as these three criteria were met at the same time:
- The stock has broken above its top Bollinger Band
- The stock has seen an unusual spike in its daily volume
- The stock is overbought according to its RSI (I use a one-month RSI)
The combination of these three criteria signals that the stock has likely tapped its "finite" cash from the market and anything that comes in over the next week or two is likely to be the last push before a natural price correction occurs.
The bottom line here is that the patient investors will get an opportunity to add NVIDIA shares to their portfolio at prices lower than their current $400+ price tag. I've seen this rodeo before... take your finger off that Buy Button.
Now Let's look at the Rest of The Market
Outside of the A.I. Surge, the market heads into this week with some barriers still overhead.
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About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Penny Hawk. He also contributes to Money Morning as the Quant Analysis Specialist.