Today we saw a large swing in the battle with bears dominating the markets for the first half of the day, with bulls eventually powering back at the end of the day and through closing. In that sense, both of yesterday’s bull and bear cases ended up playing out to some degree.
The morning began with a large gap down from premarket trading, quickly passing through a demand zone and pushing straight back up. As usual, bullish sentiment on $NVDA brought relief, with massive bullish momentum in power hour, in anticipation of their earnings after the bell. Crushing earnings and riding the AI hype wave in the earnings report continued the massive pump into after-hours trading as well.
Futures Analysis
NQ
From the premarket futures price action, it was pretty easy to determine the direction for the morning, opening down roughly 0.7%, right inside the 13650 demand zone.
With some decent momentum, bears were able to break through and establish 13566.5 as the low for the day, with bulls forcing a retest back into the zone before bears attempted a retest of the lows to establish a double bottom for bulls to take back over for the remainder of the day. The bulls shattered through the zone in the final hour, anticipating the $NVDA beat. The 13706 demand was touched before drifting off slightly.
In the postmarket, bulls broke straight through an entire zone and back into the original zone from Monday. At the moment, a pennant has been forming that may spell another leg up, although whether we see a continuation up tomorrow will likely rely on whether the premarket is able to maintain a price within the zone. Otherwise, a retrace is in order to fade the gap into the 13750 zone, indicative of an overreaction and subsequent correction.
From the daily chart, today’s movement makes the pattern rather unclear. The candles are in a position to be a bull flag, back into the resistance trendline, or a top is still in the cards, depending on how tomorrow plays out.
My bull case is a push into 13946 supply retest, and perhaps even a max price target for 14000, while the bear case is a dump back into the 13750 zone, (and unlikely) back into 13706 demand.
Index Analysis
QQQ
The Q’s paints a clearer picture than its futures counterpart. Due to the V-shaped recovery, we saw today, a possible abandoned baby doji was formed, signaling bullish momentum to come.
We now hover squarely between two price levels, 337 and 325. Near the support line and considering bullish momentum, I find it hard to support the bear side, although a test at 327 on support could spell a push into the 325 level if bears are able to conjure up enough momentum.
However, looking at the hourly, taking into account postmarket, we retraced into 337 demand. We broke through the first resistance line from yesterday, but quickly rejected right back up, maintaining some validity in the line. From here, I see a likely scenario of a partial gap fade overnight and into open, rejecting 337 to the 336 area, before a retest to the upside.
Earnings Analysis
NVDA
The postmarket pump backed by $NVDA rippled over the rest of tech, bringing semiconductors and others up as well, including $AMD.
Today was another exhibit of the fakeness of markets and the pointlessness of fundamentals. A P/E of 160 and 30% pop to all-time highs off simply AI hype and guidance in the current economy is disturbing, especially considering the fact that semis is already overbought within tech.
Tech remains the only sector propping up the economy and I expect a rug pull following the conclusion of debt ceiling talks, where money will finally be moved from the only performing sector of the economy back into bonds, once the terms of the deal are released.