Morning Comment: Nvidia (NVDA) is extremely overbought near-term.

The situation right now is ABSOLUTELY RIDICULOUS!!! No, we’re not talking about anything in the financial markets. We’re talking about college coaching. Right now, the is over $500 million in dead money for Division 1 college coaches. In other words, college coaches who have been fired (or “retired”) are getting paid more than $500mm right now.

Obviously, most of that money is focused football coaches and men’s basketball coaches, but over $500 million is owed to coaches for FBS colleges who are no longer coaching. (This number doesn’t count the $16mm that the LSU football coach will get over the next few years…or the several other firings we’ve heard about in recent weeks.)…….If you want to get rich quickly, why bother investing in meme stocks, cryptocurrencies, FAANGs, or any other financial asset??? They can actually go down sometimes! Instead, get a job as a D-1 head coach…and you’ll be set for life…whether you’re any good or not!!!!

Anyway, it was interesting to hear that the Fed engaged in some CYA last night in their quarterly report. They warned about rising risk asset prices, but they also raised concerns about the stress in China’s real estate area could widen and spread to the global financial system. In other words, they know that China’s de-risking/de-leveraging programs will negative impact on asset prices around the globe (not just in China)…just like they know that the tapering back of their QE program will have a negative impact as well. However, they want to set the stage for putting the blame on China’s real estate bubble…rather than at their own feet.

It’s a smart move on their part. The “blame game” is always a tricky one and they want to get out ahead of it this time around. However, when you go from a multi-year period of encouraging massive levels of leverage, debt and risk-taking…to one where they discourage it in a meaningful way (like they have in China)…and combine it with a situation where many global central banks decide to go from providing emergency levels of stimulus…to much less stimulus over a few short months…and it becomes inevitable that risk assets have to come down at some point. Therefore, the Fed is smart to start focusing the blame on somebody other than themselves. No, we do not think the Fed will deserve all of the blame. There will be plenty to go around, but they’re smart to try to put the blame elsewhere in advance.

Having said all this, it sure doesn’t look like the decline in other risk asset prices is going to start anytime soon. The stock market seems to want to rise every day. In fact, more and more people are looking for a “melt-up” into the end of the year. This makes things very difficult for investors. They don’t want to miss out because there is always a chance that we’re in late 1998 all over again (with a lot more upside left)…and not late 1999 (very near the top). Therefore, they keep buying hand over fist.

For us, we are very concerned about the level of the stock market, but we also realize that the top might not come for a few more months. That said, we definitely believe that the stock market is ripe for a short-term breather…one that lasts for more than a few days. As we highlighted yesterday, we’re seeing stocks like TSLA, NVDA, AMD, etc. become extremely overbought on a short-term basis (with RSI readings in the high 80s). We have also seen a big reversal to the bullish side of things in terms of sentiment. Therefore, we think that the market will see at least a short-term pullback as we move through the middle of November. (NVDA chart attached below.)

Of course, as we also mentioned yesterday, one possible catalyst could be the inflation data that is coming out this week. This morning’s PPI data was right in-line with expectations. However, tomorrow’s CPI data will get more of the focus. This does not mean that these data points will definitely be a catalyst for a breather in the stock market. However, if these inflation numbers raise the concerns about inflation even further…at the same time some of these high-flying tech stocks begin any kind of normal/healthy pullbacks…the broad market should indeed take a rest…at least for a little while.

Matthew J. Maley

Chief Market Strategist

Miller Tabak + Co., LLC

Founder, The Maley Report

275 Grove St. Suite 2-400

Newton, MA 02466


Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.

Posted to The Maley Report on Nov 09, 2021 — 8:11 AM
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