Nvidia Will Determine the Next Move

Well what can we say other than the only thing that matters is the Nvidia earnings after the close! Yes we have the FOMC minutes as well prior to the earnings, but honestly what will the FOMC have said that we already don’t know or understand. Yes they are data dependent and yes inflation is trending lower but remains sticky, so the future course for rates is well, unknown at this point. We aren’t going to be that concerned, we know there is a lot of capital still out there to deploy, but we also know many levered outfits are taking it on the chin and selling RE at steep discounts. We are even seeing more and more supply come to the market and with rates still elevated in mortgage land, well, we would have to think discounts are in the offing.

Anyway lets be honest, Nvidia is all that matters and where it goes is where the next leg of the market will go. Nvidia could rocket higher or it could crater, honestly it is a complete toss up at this point. We do know by looking at the options that the Break Even point for the At the money straddle is around $75 which indicates a hefty 10.8% move. Now we know the skew is heavy on the call side, but we also know many players are looking for this thing to pull back some, and we believe the path of least resistance is lower as well.

For those bearish types, you can look at this Friday’s expiry 675/625 put spread. It is trading around $17.5 with the full value at $50.00 which is purely derived from the difference between the 675 and 625 strikes. This is a 2.85 to 1 payoff structure. We would think the market makers would want this thing well below $700 by Friday’s close, but as we said, this one is a crap shoot.

One thing we do know, that is which ever way Nvidia trades, will determine the overall direction and next leg of the move here. So this is pretty important so please pay attention to where this all goes tomorrow after the close!

As far as the settlements sheet for today the US yield curve was bid, equities were all lower, the USDollar was weaker as was energy as Crude stumbles at that $78 level. Gold was the star metal of the day: