How Things Stand in the Market as of Sunday, May19th, 2024

Good morning Traders & Investors!

With the Dow, Nasdaq and S&P 500 hitting new highs, and last week’s inflation news in the rearview mirror, things are looking pretty good. But there’s an old golf saying that “there is many a slip between cup and lip,” and haply, as always seems to be the case in stock trading, something could come up. One could say that AI leader, Nvidia’s (NVDA) meteoric rise atop the artificial intelligence boom pretty much set the pace for this year’s market rally. But by the same token, it could have the final say as to whether that rally continues. When It reports Wednesday evening, analysts expect Nvidia earnings to skyrocket 412% to $5.58 a share with sales up 245% to $24.51 billion. But even if Nvidia beats views and raises guidance once again, will that be enough to satisfy investor expectations? One could argue that Thursday and Friday’s tech weakness amounted to handwringing ahead of Nvidia’s report, and that an Nvidia disappointment is “priced in” to the overall market, but we’ll have to wait and see.

Other things to consider next week include a plummeting VIX fear gauge to 11.99. Extremely low levels for this contrarian indicator have a history of predicting market tops. Keep in mind that the U.S. inflation picture continues to have a big say on whether the current rally remains intact and that the Fed’s decisions are not decided on a single favorable report. It’s likely going to take a few more good reports to convince the Fed it’s time to start cutting rates. Still, it seems inevitable that some cutting is likely by year’s end. It’s a question of when. Until Nvidia reports, think long and hard whether to place trades on AI-related companies, but on the other hand, be ready to jump in if the news is positive. Until then, don’t allow yourself to become overconfident.