8/24 Recap

The market sold off hard today before Jerome Powell speaks at Jackson Hole tomorrow. NVDA posted fantastic earnings, the growth in AI over the coming years will be large and all the megacaps will be beneficiaries not just NVDA. Where do people think all this GPU spend is leading? To alot of building onto of all the hyperscalers ie Amazon,Microsoft, and Google. The runway is so vast and to me this isn’t a bubble like the ones of the past, this is a multi year story that will take time to unfold, but in the meantime they won’t crash it quickly because the potential is there and years from playing out.

The SPY was rejected at the 50 day.

The QQQ was rejected at the 50 day as well.

I get why people are bearish, Powell sank us last year at Jackson Hole. We are in a pickle, there is no other way to say it. I’ve said for a long time I thought eventually the fed would have to raise their inflation target and I still do believe that. 2% does not seem truly achievable and we likely have to embrace 3% sooner than later but that would throw things into quite the mess when they have to begin pricing that in. Will Powell discuss that tomorrow? I don’t know. What I know stocks go up and down, but zoom out over the last 100+ years and equities are up and to the right. If you’re a trader, then worrying about the day to day is important, if you’re an investor or a trader making longer term bets, then the day to day is silly to fret over. Equities are the lifeblood of our economy today, consumer sentiment and spending depends on them going up. When stocks stop going up, consumers stop spending and we have problems hence why we saved stocks first in our battle against Covid.

So my point is the same it has been from the first day I wrote this substack last year, stocks eventually go up, as long as you don’t own junk, there’s always various sectors of strength and for the moment it isn’t tech stocks. That’s ok, there are 493 other companies in the S&P 500 besides the big 7 and for a few weeks a year you’re going to have to acknowledge their existence before we go back to the big 7 carrying everything everyday.

Will we get a panic tomorrow? It looks possible with all the bearish engulfing candles forming today but the day is young and things can reverse. Think about how a bearish engulfing candle forms, a name has to gap up and be met with sellers all day to close below the previous days open. That is just telling you many participants don’t want to be in the market before Powell speaks. Either way we’ve heard from all the big companies to this point and we know what issues lie ahead. We have not really seen any issues with consumer spend like we’ve heard would exist, we have not seen anything in the guidance that is worrisome either. We also know these rate hikes take time to run through the system. So issues could be months out into the future still. For now, the uptrend is holding firm, but tomorrow very well could change it. As long as you own companies that aren’t expensive and are growing, you will be fine.

Just remember what you see in the charts is all that matters. How many people this year had the thesis that housing would get decimated because of rates? Rates up surely housing will be hit hard. Housing stocks were some of the strongest all year. The charts showed the buying and the people with the “thesis” were wrong. I’ve said for a long time that I thought the economy was horrible but stocks are stocks and they’re not the economy so the focus should be on what stocks are doing with less emphasis on what the economy is doing. Tomorrow if we break that 11 month uptrend it very well may be time to move aside or buy puts. Until then, its not something I worry much about.

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