The Market's Big Day Finally Arrives Tomorrow

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8.27.24

#MACRO: $CURVE, $USDJPY

#STOCKS: $NVDA

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It was another quiet day for the stock market, with everyone holding their breath for Nvidia’s results coming out tomorrow after the close. Where would this market be without Nvidia? Likely much lower. The IV for $130 calls for this week’s expiration is now up to 125%, and that figure could rise even more by the time the market closes tomorrow at 4 PM ET. I feel that a rally for this stock won’t come easily, considering the amount of implied volatility set to roll off and how heavily positioned the stock is for a bullish outcome. In fact, there is a good chance, the extreme levels of bullish may actually be bearish as call premiums burn.

(BLOOMBERG)

Additionally, the market has become accustomed to Nvidia delivering $2 billion beat-and-raise quarters. Analysts are already expecting $31.85 billion in revenue for the November quarter—so can Nvidia once again guide 8% above the street and hit $34.4 billion?

Also notable is how analysts consistently raise their sales estimates above the company’s guidance. For the February quarter, Nvidia guided to $16 billion, analysts estimated $16.09 billion, and the company delivered $18.1 billion. In May, guidance was set at $24 billion; analysts expected $24.7 billion, and Nvidia reported $26.0 billion. This quarter, with guidance at $28 billion, estimates have climbed to $28.9 billion. So, if Nvidia reports $30 billion in sales, the beat shrinks to $1 billion instead of $2 billion.

Typically, Nvidia guides the next quarter $4 billion above the previous one. For example, the company guided $20 billion for the February quarter, then $24 billion for May, and $28 billion for August. Analysts have now estimated $31.9 billion for the November quarter, effectively following the pattern. However, if Nvidia only guides to $32 billion, it might not be enough, as this has already been priced in. The company might need to break the mold and guide $6 billion above its previous quarter’s guidance to reach $34 billion.

A $1 billion beat on the top line paired with an inline guide could trigger a less-than-favorable reaction in a market where the stock is trading at 21 times its next twelve months’ revenue estimates.

(BLOOMBERG)

Also, short sale volume has been on the rise in recent days,

Anyway, the yield curve continues to steepen, now trading at -7bps.

Meanwhile, the dollar continues to weaken versus the yen, with the USDJPY now testing that big support level at 143. A break of technical support at $143 sets up a potential decline back to the August 5 lows.

That’s it for today.

Mike

Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.