5 Trillion Dollar Titan
RLT Newsletter
Wednesday gapped up after we had three down days in a row. QQQ and tech once again led the market higher after the 10-EMA and key support held at $731 on SPY. That is now the main level to watch on the broad market. If we chop around this level and then break down below $731, it becomes a high probability trade down to $725. However, if we instead consolidate here and then break out higher with volume, it is going to start looking a lot more like the 2023 and 2025 playbook where the market barely rested before another vertical move higher. That type of move would likely push SPY into the upper trend line and 2.18 extension before any major drawdown occurred. That would certainly be a max pain event for both the bears and everyone still sitting on the sidelines.
While I don’t necessarily expect that outcome based on everything I am currently seeing, I have to follow price. We have seen this exact type of move two of the last three years, so there is no reason it can’t happen again. The key price to watch on the broad market is the low of Tuesday’s candle. If that breaks, we should move quickly down toward the May 6th gap fill. If that gap fill fails to hold as support, then we are likely looking at a larger correction with key downside levels at $712 and then $700 on SPY.
If we start seeing quick closes back below Wednesday’s candle across most names, that would be the first real red flag. The pivots that formed this week are fairly solid and should not immediately break down if the market is truly bullish again here.
What was really interesting about Wednesday’s bounce is that participation was broad. Even many of the lagging sectors joined in. Financials held support and bounced nicely, consumer discretionary showed strength, and even regional banks had a strong bullish session. Semiconductors were up and IGV also participated, which suggests this is more than just market rotation. However, it could be partially driven by shorts unwinding.
SPY Daily Chart
I focus primarily on the price action of the stocks I want to trade along with the general market. However, when I start seeing bearish macro charts develop that point toward larger economic issues, I do pay attention. Those types of setups often take months to fully develop and play out. If price action is saying something different than the macro picture, I will still follow price first.
That being said, the 10-year and 20-year yields are currently pulling back into support after a very bullish run higher. If yields find support at prior resistance turned support and begin pushing higher again, that would not be a good sign for risk assets. For equities to make another massive run higher similar to the 2023 and 2025 analogs, you would likely want to see yields pull back more meaningfully through the summer. Macro factors and charts do not always sync perfectly with price action, which is why I only use them as secondary indicators.
10-Year Bond Yield
Nvidia
Everyone was sitting on pins and needles waiting for the NVDA report. I am writing this a few hours after earnings dropped and the stock is flat, slightly down. A lot can change overnight, and often does after earnings as the market continues digesting the data, but for now it looks like we are headed toward a relatively muted open for the largest company in the world.
NVDA crushed earnings, which at this point is expected. They beat on revenue, EPS, and guided higher once again. The real driver of the move in this space has always been Capex spend from the big tech companies, which we already saw report. So I think we all knew things were still healthy here. NVDA earnings just put another stamp on it.
As far as the chart and sentiment goes, NVDA was working on a pivot on Tuesday and Wednesday as price bounced directly off the prior all-time high from late April. The 1.618 extension from the October to March drawdown projects a target near $240, which remains the primary upside level if we get a more bullish reaction. If NVDA opens below Tuesday’s low, we likely see some selling back into the low $200 region. As long as NVDA can hold $196 and maintain that major support zone, the upside target remains viable. However, my short-term alert level remains Tuesday’s low as the paths higher into $240 becomes more complex and convoluted with a decent breakdown here.
NVDA Daily Chart
