NVDA Earnings: Signalling a Peak?

S&P 500 is expected to reach a new record at the open, but will the uptrend continue?

Stock prices went sideways again yesterday, as investors awaited the important quarterly earnings release from NVDA. The S&P 500 index lost 0.27%, extending a week-long consolidation following the recent record-breaking rally. Last Thursday, it reached a new record high of 5,325.49 after breaking above the previous highs from March and early April on Wednesday.

Last Monday, I noted ”The question arises: will the S&P 500 continue its bull market and reach a new record? It seems more and more likely; however, the index may see some short-term uncertainty as it approaches a series of the previous local highs and resistance levels.”

This morning, stocks are likely to open higher after the NVDA release, as indicated by the futures contract gain of 0.8%. So, the S&P 500 index will set a new record high at the open.

Investor sentiment improved, as indicated by the yesterday’s AAII Investor Sentiment Survey, which showed that 47.0% of individual investors are bullish, while 26.3% of them are bearish. The AAII sentiment is a contrary indicator in the sense that highly bullish readings may suggest excessive complacency and a lack of fear in the market. Conversely, bearish readings are favorable for market upturns.

The S&P 500 continues to trade above an upward trend line, as we can see on the daily chart.

NVDA Earnings: Signalling a Peak? - Image 1

Nasdaq 100 Reaches New Records

The technology-focused Nasdaq 100 index reached yet another new record high of 18,756.69 yesterday, and this morning, it is likely to further extend the uptrend following the NVDA earnings release. It is expected to open 1.2% higher.

NVDA Earnings: Signalling a Peak? - Image 2

VIX Remains Close to 12

The VIX index, also known as the fear gauge, is derived from option prices. In late March, it was trading around the 13 level. However, market volatility led to an increase in the VIX, and on April 19, it reached a local high of 21.4 - the highest since late October, signaling fear in the market. Recently, it was going lower again, and yesterday, it was as low as 11.78 showing a lot of complacency in the market; however, before the close of the day, VIX bounced back above 12.

Historically, a dropping VIX indicates less fear in the market, and rising VIX accompanies stock market downturns. However, the lower the VIX, the higher the probability of the market’s downward reversal.

NVDA Earnings: Signalling a Peak? - Image 3


NVDA Poised for a Record-Breaking Rally

Yesterday, I wrote that “The NVDA stock is likely to break out of a short-term consolidation on its quarterly earnings release today after the session closes”.

And today, it is likely to open almost 7% higher following yesterday’s earnings release. For the last few sessions, the stock has been fluctuating within a relatively narrow trading range. However, the question arises: will that record-breaking advance lead to some profit-taking? It’s a likely short-term scenario, but it doesn’t mean that the uptrend will reverse. Overall, the support level will be around $975, marked by the early March top.

NVDA Earnings: Signalling a Peak? - Image 5

Futures Contract Reaches New Highs

Let’s take a look at the hourly chart of the S&P 500 futures contract. Last Thursday, it pulled back from a new all-time high and has been fluctuating since then. The NVDA earnings led to a breakout higher, and this morning, the futures contract is reaching new record highs. The support level is now at 5,340-5,350, marked by the recent fluctuations.

NVDA Earnings: Signalling a Peak? - Image 6


The stock market is set to open higher, with indices like the S&P 500 and Nasdaq 100 reaching new record highs, buoyed by positive NVDA earnings.

No confirmed negative signals are evident as investor sentiment remains elevated. However, that overly bullish sentiment, coupled with low VIX readings, may be worrying for stocks in the short term. Some profit-taking may be on the horizon.

In my Stock Price Forecast for May, I noted “Where will the market go in May? There's a popular saying: 'Sell in May and go away,' but statistics don't consistently support such clear seasonal patterns or cycles. The safe bet for May is likely sideways trading, with investors digesting recent data suggesting that inflation may not be transitory, and the Fed could maintain its relatively tight monetary policy. However, economic data isn't entirely negative, and strong earnings from companies may continue to fuel the bull market.”

For now, my short-term outlook remains neutral.

Here’s the breakdown:

  • Investor sentiment much improved following the NVDA release; S&P 500 is poised to extend its bull-run.
  • On Friday, April 19, stock prices were the lowest since February, indicating a correction of the medium-term advance. Last week, the S&P 500 retraced all of its mid-April sell-off, reaching a new record high above 5,300.
  • In my opinion, the short-term outlook is neutral.

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Thank you.

Paul Rejczak,
Stock Trading Strategist