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NVDA Again
BraVoCycles Newsletter
February 12, 2024
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Table of Contents
Market Twists & Turns
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Market Summary
The market started a reversal mid-day, as suggested on Sunday. In the morning, both SPX and VXX were going up, hinting that SPX may reverse its direction at any moment.
Now the big question is whether today we had a top of significance or this pullback is just another buy-the-dip (BTD) opportunity. It looks impulsive down, and I could count complete 5 waves in multiple indexes, but that does not guarantee a top, as the wave structure can extend. To be more certain, we need SPX below the support region around 5k and decisively below 4,970.
Medium- and long-term technicals, and cycles and EW counts discussed in the last several days in the premium content suggest it is time to reverse direction toward a spring cycle low. But caution is still required as every dip has been bought, and short-term cycle troughs were just mild sideways consolidations/corrections.
NVDA – The Last Nail in the Coffin
You might be asking why NVDA again. Many reasons, one of Magnificent 7 and AI leaders, parabolic rise, extreme overvaluation relative to the real economy, etc. If/when NVDA rolls over, it will likely impact NDX and the overall market and possibly burst the AI bubble.
I analyzed NVDA cycles using different methods. The y yielded the results for the dominant cycle ranging from 124.2 weeks to 146 weeks. My wavelet cycle detection program, likely most accurate in the time-frequency plane, estimated the NVDA dominant cycle at 132.8 weeks, as shown in the chart below.
The figure below shows the cycle price projection for this (dominant) cycle. NVDA satisfied the projection, though it could still push a bit higher. Notably, all other cycle projections are satisfied. When all cycle projections are satisfied, the instrument should reverse the direction, at least temporarily. This would rhyme with the turning point prediction for NVDA presented in Sunday’s issue.
Finally, below is an interesting tidbit (from X, former Twitter) on the relative valuation of NVDA vs the energy sector. I know, I know, NVDA is an excellent company, and it is all about growth and AI, but …
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Short-Term Technical Analysis
We suggested yesterday that in the short-term major indexes should correct from overbought levels in both sentiment and technicals. Indeed, this correction started mid-day. In the morning, both VXX and SPX were going up, which was a hint that a reversal in SPX was to be expected.
The figure below shows SPX and NDX price oscillators for the hourly charts. Normally, it should take another day or so to get oversold. SPX has support at around the 5,000 level. Below 4970 would be the first indication that SPX topped and is going down. Hopefully, by mid-week, we will get more clarity regarding the levels and the wave structure to gauge further moves in SPX.
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