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A good day for NVDA is a good day for "the market" but there's more to it. Using NVDA as a contrarian signal...
It's been an interesting summer and what I've taken from the last few months is this, there are only really two charts to watch:
IWN (Russell 2000 EFT)
and, get ready for it....
NVDA
We have gotten to a point where NVDA IS the market, if the S&P or Nasdaq is up it's because NVDA is up. As boring as that sounds, and it's boring as drying paint, there are important things to pull from this data. For example, when was the last time the market was this concentrated? Over the past 100 years market concentration has always been a thing, most recent stocks that dominated the market concentration space were the likes of IBM, GE, ExxonMobile and so on.
So where do we go from here?
Here is a look at these charts with one day and 30 day performance:
One day performance of IWM, SPY, QQQ and NVDA
Let's look at 30 day performance of those
Highly concentrated stocks of the past have mimicked global geopolitical powers, no one thinks they will lose importance but somehow they always do. Nvidia has a lot of momentum now and it's a great signal chart so while it's all the market cares about there are great ways of using it.
First off, a good day for NVDA (and therefore SPY, QQQ) is a bad day for IWM (Russell) and vice versa. So why not use these charts as contrarian indicators to one another? If you like small cap stocks you really need an overbought signal on NVDA before going after those with any real intention. The pulley system between the two is pretty lock step, it's rare to see IWM and NVDA rallying together. Earlier this year and certainly last year it was all about the 10Y yields, if the 10y was up the market was feeling the pain, this is very similar to the NVDA/IWM relationship.
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