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If you told me that NVDA and bitcoin would each be down over -6.5% and yet the S&P would only be down modestly, I would have expressed major disbelief. But that is what happened.
In a reversal of recent trends, we had small caps rally +0.5% and NYSE advancers handily outpace decliners by over 2:1. Go figure. Perhaps this is the start of the long-awaited rotation out of tech, but I think it’s more related to end-of-quarter window dressing (Remember, Friday is the last trading day of the quarter).
As startling as yesterday’s pullback might have seemed, bear in mind that some of these stocks are up remarkably even after this pullback. As of now, NVDA is still up over 11% this month and 35% this quarter on a parabolic rise. That said, parabolic moves tend to end unpredictably and with outsize corrections. But even as they fall, they don’t necessarily go down as fast at they went up.
For example, a bit over a month ago we wrote how copper and utility stocks were zooming higher as part of AI-mania. The thought is that AI will consume immense amounts of electricity, which would benefit utilities and create excess demand for copper wiring. Both rose dramatically, with copper going parabolic. We understood the logic behind the moves, but not the rapid pace. Let’s see how that turned out:
6-Month Daily Candles, September COMEX Copper Futures (green/red candles), Utilities Select Sector SPDR (XLU, blue)
Source: interactive Brokers
Now let’s add NVDA to the comparison. Bottom line, its parabola – or more specifically, parabolas – have been far sharper and steeper.
6-Month Daily Candles, September COMEX Copper Futures (green/red candles), Utilities Select Sector SPDR (XLU, blue), NVDA (purple)
Source: interactive Brokers
Of course, NVDA is a profit generating machine, where utilities are constrained by regulation and commodities like copper don’t generate profits in and of themselves. So it is clear that we can and should expect a stock like that to outperform. But the point of the above chart is to show that even after a solid rally today that has thus far erased most of yesterday’s decline, there is still a long way to go before we can assure ourselves that the recent uptrend is not threatened. But with all the money riding on this stock into quarter’s end, it is hard to imagine that FOMO-powered portfolio managers will let it drop without a fight before a major marking period.