By: Michael Kramer, Mott Capital Management
Stocks finished the day lower, one day ahead of the 2024 Presidential election. The move wasn’t much to get excited about, with the S&P 500 down just 25 bps. The chart suggests we’re merely consolidating over the past 2 days, with another leg less likely to come.
The break of the rising wedge looks quite impressive, and the put wall at 5,700 seemed to be enough to hold things together. However, given the current look of the technical charts, a drop to 5,600 doesn’t seem out of the question.
I know many people expect the market to rally after the election, and it may, given that we’ll likely see an IV crush as the event risk passes—something we see regularly, however, where the market heads between now and year-end will likely rest again in Nvidia’s hands. The stock now holds an overwhelming influence across all major indexes due to its recent inclusion in the Dow.
Nvidia alone accounts for 26% of the gains this year in the Bloomberg 500, a proxy for the S&P 500. Following Nvidia, Meta contributes nearly 6%, Amazon and Apple around 5% each, and Broadcom and Microsoft about 3% each. All of these stocks are performing well due to the AI trade, so let’s face the facts: these six stocks make up just under 50% of the index’s gains this year. Take away Nvidia, and you take away the AI trade—and with it, nearly half of the index’s gains.
It’s even more extreme for the Bloomberg 100, which serves as a proxy for the NASDAQ 100, with Nvidia accounting for 38% of the gains and the top 5 stocks making up almost 78% of the gains.
At this point, Nvidia has gone basically nowhere since July, which is why the NASDAQ and the S&P 500 have largely stalled as well. The results and guidance it provides on November 20 may have much more to say about where the market goes from here than anything else.
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DISCLOSURES:
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.
