NVDA & Mag 7 Breaking Down; Russell 2000 (IWM) and Retail (IYT) Get “Silver Cross” BUY Signals
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NVIDIA (NVDA) broke down today in what looks like an echo of last month's pullback. There is a short-term double top with price resting on the confirmation line. This could just be a one day event, but assuming that a correction has begun, we see first support at about 118.00 -- a -17% decline. The next most obvious support is at about 97.00 -- a decline of about -32%.
The primary problem with NVDA is the steep parabolic advance from the 2022 low. Such advances beg for correction, and we can see three previous corrections on this chart.
As the title said, all the Magnificent 7 appear to entering corrections.
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Today the Russell 2000 ETF (IWM) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. Like so many other indexes, IWM is in a narrow trading range that generates whipsaw signal changes, but the strength of today's move implies a probable upside breakout from that range.
The weekly chart shows a PMO rising above the zero line, but we now see a lot of congestion in 2021 that will provide resistance to further advance. That is not to say further advance is not possible, but that it will possibly be more difficult.
Also today, the Retail ETF (XRT) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. Again we have the narrow trading range and potential for whipsaw. In fact XRT switched to NEUTRAL two days ago. Nevertheless, this seems to be an authentic change of direction, considering that it is a high-volume reversal on a day when part of the market was falling apart.
The weekly chart doesn't reflect much confirmation regarding this one-day change of direction, but the weekly PMO is flat above the zero line, which is encouraging.
Conclusion: Mega-cap stocks began to break down today, but other areas of the market have new found strength. It is only one day of this 'bifurcation' between smaller-caps and mega-caps, but a broadening of the rally could preserve the integrity of this bull market.
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