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“I believe in everything until it’s disproved.” – John Lennon
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
There’s not much economic data on the calendar this morning but a ton of Fedpseak scheduled, so there is the potential for some volatility around these speeches throughout the day. Futures indicate a modest decline at the open but they are off their overnight lows after major overnight volatility in China. The Shanghai CSI 300 fell over 7% as the Chinese government looks like it has under-delivered on stimulus expectations. Last night’s decline was the largest since early on in the Covid crash, and the ASHR ETF that trades in the US is on pace to crash 20% in two trading days! The only other time it fell over 20% in two sessions was in the summer of 2015 when the Chinese government devalued the yuan. If you thought crypto was volatile, it looks like a ‘widows and orphans’ asset class compared to the moves in China over the last few weeks.
In today’s Morning Lineup, we covered the latest sales results for Taiwan Semi (TSM) and much of those sales come from Nvidia (NVDA). NVDA has rallied over 14% in the last week taking its market cap back above $3 trillion and ahead of Microsoft (MSFT). With a market cap of $3.26 trillion, the only company with a larger market cap than NVDA is Apple (AAPL) at $3.43 trillion. The gap between the two companies is now roughly $170 billion, or one Disney (DIS).
NVDA’s stock had a pretty rough summer. After peaking in June, the stock made a series of lower highs with each successive rally attempt. After its late August lower high, though, the ensuing pullback bottomed out at a higher low, and the pullbacks became milder as the stock rallied back above its 50-day moving average. After successfully testing its 50-day moving average last week, the stock has rallied, and yesterday’s 4% rally enabled the stock to make its first ‘higher high’ since June.
NVDA’s technical picture may be improving, but the picture for the semiconductor sector isn’t as strong. While the Philadelphia Semiconductor Index (SOX) has rallied above its 50 and 200-day moving averages (DMA), it has been hung up at resistance all summer. One bright spot for the sector is that the early September sell-off wasn’t as deep as in August. So, while the SOX may not yet be at the point of making higher highs, there has been a higher low. It’s a start!
Unfortunately, the relative strength of the SOX versus the S&P 500 doesn’t look as promising. September’s sell-off was deeper than August’s relative to the S&P 500, and the subsequent bounce back has also been weaker. In last week’s quarterly Pros and Cons report, the recent performance of semis showed up on the negative side of the ledger, and this chart is a big reason why.