Shifting Tides: Navigating Market Uncertainty Amid Nvidia’s Plunge | September 3, 2024
September has started on a weak note for the stock market, with a clear breakdown from the range we’ve seen over the past 20 days. Despite efforts to hold that range, today’s decisive drop signals that bearish momentum has taken over. Last Friday, the S&P 500 ended near the top of its range but couldn’t break higher. Now that it’s reversed and broken below the lower boundary, it’s clear sellers are in control, making a more defensive approach necessary.
The NASDAQ and Nvidia both show a significant downtrend this past month. Nvidia, in particular, lost a record $278 billion in market cap today, a strong sign of risk-off sentiment, especially in high-valuation tech stocks. The NASDAQ has been weak overall, with the peak on July 10th marking a shift where the market began losing steam. Even though there was a brief rally after dovish comments from Fed Chair Powell, the market remains under pressure as we approach key economic data.
Volatility, reflected in the rising VIX, has increased ahead of the upcoming employment report, showing that the market is nervous. The bond market’s rally, particularly in long-term Treasuries, points to a move towards safer assets. This fits with late-cycle economic signals, like the inverted yield curve and potential Fed rate cuts, which usually indicate the end of an economic expansion.
Defensive sectors, such as staples, have been among the few areas showing strength, indicating that investors are moving toward safer bets. Small-cap stocks and other rate-sensitive areas have struggled, highlighting the market’s concerns about economic uncertainty.
In the crypto market, Bitcoin holding below $61,500 despite broader market weakness is a good sign. However, until it breaks and stays above this pivot line, the outlook remains bearish, with a possible drop to $53,500.
Given the current market trends, it’s wise to take a more defensive stance, focusing on safer assets and sectors while being cautious with high-valuation tech stocks. The recent breakdown in the S&P 500’s range suggests a shift in market momentum, so preparing for more potential downside is prudent.
