The day started with a small gap to the downside, with SPY dropping just under the 495 level to 494.91. It seemed to be an indecisive trading day, with NVDA earnings due after the bell. SPY traded in a narrow range for most of the day, staying between 494 - 495. with only slight breakouts on either side. SPY drifted down to 493.56 late in the day, marking the low of the day. That seemed to spark a rally, as a strong move in the final 45 minutes took SPY to 497.37, and closed at 497.21.
We had been looking for SPY to make a move to 490 - 491 to complete an inverted corrective Wave 4, but we never made it down to that level. It is still possible that it will reach that level, but the technical indicators suggest we have seen the bottom of this short term wave. It is likely that we have some more work to the upside before we see one more move lower for the completion of Wave 4. Our overall count remains the same, with a target for SPY above 517, and most likely somewhere near 530.
I posted my Long Term Count for NVDA yesterday on my substack. I will be using that to post counts on NVDA and some other stocks. Be sure to subscribe so you won't miss important updates. In case you missed it. here is the post:
Arguably the most anticipated event of this trading week will be the NVDA earnings, scheduled for Wednesday after close. The historic run in this stock has been well documented over the past year and a half, with the AI frenzy fueling an incredible run over that period. In October 2022 NVDA traded as low as $108.13, and recently traded as high as $746.11. Nearly a seven-fold increase in less than 16 months.
This kind of run has not been unprecedented for NVDA. This run was preceded by an eleven-fold increase from January 2019 to November 2021 when NVDA went from $31.11 to $346.47.
In this post I will outline my long-term count for NVDA. This chart begins with the inception of NVDA and brings us to the current outlook.
The first wave of note terminated in January 2002, and had the high at $6.06. A steep correction followed, bringing NVDA back to $0.60. As you can see, I have these labeled as Wave 1, and Wave a. A multi-year bull run followed after that, with NVDA running up to $9.92 by October 2007. Another correction followed, with NVDA dropping to $1.44. You will notice on the chart that the two corrections so far appear as nearly the same magnitude on the chart. My interpretation is that NVDA started forming an inverted corrective wave from the Wave 1 high, and you see the two waves are labeled as Wave b, and Wave c. In this structure, a 5 wave “corrective” wave occurs, which carries the equity in the direction of the initial impulse Wave 1. It is deemed a corrective wave since the corrective waves a, c, and e are related instead of the impulsive waves, and “inverted” since this wave moves in the direction of the original impulse wave as opposed to a normal corrective wave which would move in the opposite direction.
With the first three waves of the inverted corrective wave complete as a, b, c, the expectation would be to see Wave d move in the impulsive direction, and Wave e to then complete in relation to waves a, and c. We can see that is exactly what happened, as Wave d was extremely powerful, lasting 13 years, and taking NVDA up to a high of $346.47. Also notice the structure of this wave. A Wave 1, followed by an inverted corrective Wave 2, with Wave d being the most powerful wave, and the corrective waves a, c, and e being similar in magnitude. Waves 1, 3, and 5 then complete in relation to each other, which constitutes a completed wave.
Once Wave d completed, Wave e followed, completing in relation to Waves a and c. Since then NVDA has completed Waves 3, and 4, and is now in Wave 5. Again you will notice the resemblance of Waves 3, 4, and 5 (in green) from the lower magnitude Wave d. We often see this type of relationship between different magnitude waves.
With 4 waves completed from the 1999 low, we can project where Wave 5 will terminate. As I said, waves 1, 3, and 5 form a specific relationship, so we can use that to project the Wave 5 high. If the current structure proves correct, Wave 5 will complete above $1365.00.
This information is provided for educational purpose only, and in no way should be taken as investment advice. Trading around earnings can be extremely volatile, and the long term count is not intended to provide directional bias around those earnings.
Here is an update for today:
From the final Wave 4 on the long term chart, we can follow the development of Wave 5. Wave 1 completed at 505.48, and was followed by what we are calling at the moment Wave a of an inverted corrective wave. Wave b of that inverted corrective wave was extensive, and carried NVDA to an all time high of 746.11. The correction from there has been Wave c, and on shorter time period charts there are indications that that wave has completed. If so, we should see a resumption of the uptrend to complete Wave d.
