One Chart Gives You A Head Start on the Nasdaq

Okay so Nvidia put up blowout earnings and the stock is giving it all back.

I do not like this. I do not like it at all.

We gapped up on the print, and then it did not take out the local high. Not even close. We gave up the gains from open to close yesterday and now we are sitting here trying to fill that gap.

I love to see a leader like Nvidia make a new track on a number like that.

And it has absolutely not.

Same story with the QQQ's, by the way.

We have been consolidating since May, you guys. SPY at least broke out of something and the QQQ is off in its own little world doing nothing.

I couldn’t work out what was underneath both of them until Mark threw something at me.

Then I pulled it up myself and it's unbelievable.

It’s driving the bus…100%

And the bus looks like it is about to drive off a bridge.

Let me show you.

 

Pull up TLT on a one-day chart and put the QQQ right next to it.

TLT is long-dated Treasury bonds and that is all you need to know about it for this.

Now watch the sequence, because this is what got me.

TLT goes up, and the QQQ's go up with it. Fine. Then TLT starts to roll over.

And the QQQ's take a second, just a second, and then they die.

Every time. Look at it and you'll see it, and then you're going to see it everywhere and you will not be able to stop.

One second of warning is what that chart hands you.

Why bonds get to boss tech around

Okay so knowing the sequence is fine, but knowing why it happens is what lets you trust it.

Rates set the price of everything.

If somebody can get paid more just to sit in a government bond, they need a much better reason to own a growth stock instead. So money leaves the stuff furthest out on the risk curve first.

And the Q's are the furthest out. All that value is in earnings that show up years from now. When rates go up, those future earnings are worth less today.

That's math, not sentiment.

Which is why bonds move and then tech moves, and not the other way around.

What set this off

Warsh spoke at Jackson Hole this morning and would not tell anybody what the Fed is going to do.

What he did say is that inflation is running above target and that he treats 2% as a hard number. Odds of a rate hike this year jumped to about two in three.

All of that lands in bonds first, like it always does, and bonds have been selling off since.

So look back at Nvidia now

I'm not saying the earnings were bad. They were great.

But when the overall market is bearish, it puts pressure on even a decent earnings reaction. A leader gaps up on a monster print and can't take out its own local high, and that tells you something about the market instead of the company.

I would not be surprised if Nvidia is down next week. I'm not gonna lie, I would not be surprised at all.

Lastly, if bonds keep selling off from here, things are going to get ugly.

Real ugly.

Rock On,

Voz

P.S. An ugly market hurts long term investors. But for traders like us it screams opportunity. If you want to see how we make money even in a tough market, come trade with me for the next 30 days.