Stock Market Sells Off As Nvidia Tumbles (Uncut) 03-04-2025

This is a test. Hi everyone, and welcome to Stock Market Today for Tuesday, January 7th. I’m Alyssa Koram, and today it was a pretty gnarly day in the market.

Here is my colleague to break it all down with me, Ed Carson. We’ve got a lot to get to today, Ed. Wow, what a day.

Yeah, I don’t think you need me to break down the market. The market was breaking down. It broke itself down, yeah.

I want to take a look at Nvidia, Applovin, and Netflix. Okay, we’ll take a look at those stocks, but first let’s analyze the major indexes, and we’ll kick things off with a look at the Nasdaq Composite, which was the hardest hit today as tech led the sell-off. The Nasdaq down 1.9% by session’s close.

Meanwhile, the S&P 500 was off 1.1% back below that 50-day line. The Dow was down 0.4% today, so not too hard hit in comparison today, but if you just look at the context, it’s been weaker. You see that relative strength line.

And then the Russell 2000 down about 1% today, continuing to look weak here. So tech did lead the sell-off, Ed, but there was also a little bit of an economic data flare to the market’s reaction today. Yeah, there was a couple of economic reports, job openings, and ISM Services Index, they were stronger than expected, pushed the 10-year treasury yield up to an eight-month high.

So that’s a factor. I mean, that’s becoming an issue there. And some of it is, okay, concerns about inflation, concerns about this and that.

It’s also a normalization. Some of this is normal because we’re getting the 10-year treasury yield had been below the two-year yield for so long. That’s not normal.

We had just gotten used to it. So some of it is becoming normal, but nonetheless, it’s a drag on stocks. Exactly.

And so in terms of technical levels, we’re watching for the NASDAQ. We did see a little bit of resistance in Monday’s session, right at that round number of 20,000. So backing away from that pretty considerably today, closing below the 21-day line.

We are still above the 50-day line. So I think when you see this kind of weakness, your expectation is to kind of see a continuation of that, right? So next stop, if we are to continue to see declines, will be that 50-day line and then that most recent reversal or support day, which was on the 2nd of January, the first trading day of the year, Ed. Yeah, 50-day line test would certainly seem like a likely scenario.

It doesn’t have to. Friday’s jobs report will be important. But I think just putting it also in context, until yesterday, certainly yesterday near the highs, it was looking like the NASDAQ and maybe the S&P were getting close to sort of escaping like, okay, we’re going to move out of this range.

I mean, that’s part of the problem. You never know if that move out of a sideways range unless it really clears it, has it done it or not. And today’s puts it in the context, no, those last few days, well, it looks like it’s just the up part of an up and down situation.

And now we had some down. It doesn’t mean we’re going to break down, but it does look like a range run. Just makes it very difficult to buy because there was all sorts of little flashing buy signals on Friday and then Monday and the leading stocks have been outperforming, but it’s just very difficult to make money.

You just look at that chart. Every time the market was flashing buy signals, basically a day later, it was selling off. Yeah.

So a continuation of the volatility we’ve seen as of late. So the next couple of days I think are going to be critical, as you mentioned, to see if we continue to break down or if we can shake this off and perhaps tighten up and rebound. Okay.

And the S&P 500, this one’s looking a bit weaker here, Ed, yesterday, getting back above the 50 day, the 21 day, flirted with a 6,000 briefly got rejected there. So two round number rejections yesterday and now back below the 50 day line. Yeah.

You know how I like those trend, also the trend lines. This was also the trend line on the downside. You could see that it felt like we were cutting up there.

So there’s all sorts of reasons. If we had moved above that, I think it’s like, okay, we’re really moving. We didn’t.

I mean, the thing is we didn’t. And so that’s- We still could. We still could.

And that’s the thing. There’s so many stocks that look like this or are right around the 50 day lines that with one good day, they’re actionable. One bad day is like, oh, so- Avoid, yeah.

You can’t get yourself trapped into too bullish or bearish sentiment in this kind of environment. Yep. We will remain nimble.

All right. Anything else, Ed, for the major indexes before we move on? Let’s move on. Okay.

We don’t want to look at these ugly charts anymore. We have some other ugly charts to look at. I guess one call out would be a comparison between SPY and RSP.

So SPY today down seven tenths of a percent, RSP down three tenths of a percent. So showing that it was the mega caps that bore the brunt of the beating today. Yeah, bore the brunt.

But as you say, like with the Dow and the Russell, RSP is clearly in that lower portion of this whole range. This one looks closer to breaking down. These kind of indexes and ETFs look like they need a few days to look reasonable to get out there.

Yeah. And then QQEW representing the NASDAQ 100 down 1.4 percent on the day, while QQEW down at nine tenths of a percent after bumping up against that 50 day line on Monday. So something to note as well.

Absolutely. Okay. Well, speaking of weakness in mega cap tech stocks, let’s take a look at prime example number one today.

And that is chip giant NVIDIA full disclosure. I do own a position I was getting in most recently back in September. So I do have something to show for it, but not a whole lot, especially after today’s damage down 6.2 percent.

And last night we did hear from CEO Jensen Wang at NVIDIA’s keynote speech at CES unveiling new products, really getting into detail about the technology behind what they’re doing. And I think showing a lot of use cases that make it feel a little bit more real to consumers. But the fear here is that this could have been a sell the news event and it looks like it was.

Yeah. And it reminds me a little bit of the earnings report because everybody’s like, you know, went above 150, hits a new high and then immediately turns around. I was close flat that day, but it was the presaging a few weeks of weakness.

All the analysts were bullish on the earnings. You see a lot of heard of, you know, bullish comments this morning. But the market, you know, the price pays and, you know, this is coming back down.

It’s still finding support. I think it’s just above the 50 day line. Technically it’s just below the 10 week.

So it’s right at the 50 day line, right at the 21 day line, back below the, you know, maybe some of the entries that you had. So people may have entered it, say, right around that area or at 146. You know, you know, those folks are now down a little bit.

They don’t have to sell necessarily, but it’s just discouraging. So obviously the market really needs this. This is one of the biggest companies out there and so many other companies take their cue off of Nvidia.

So really important to see this one pulled around here at least. Yeah. And Ed, how much of this do you think was Nvidia specific and how much of it do you think was the economic and interest rate side of the equation? At least short term.

I think if you go in today, you can get a little bit of a look on that because the market really sold off at 10 o’clock Eastern. And I think that we saw, it was really around that time that really things seemed, but you can see that it gave up those gains even before then, but it really sold off. So maybe it was sort of like, well, we don’t have no reason to go up on the news, you know, but then it really, really sold off at 10 o’clock Eastern at that point.

So a little bit of both, but I think maybe more on the economics. Well, we’ll have to see again, just like with the broad market, where do we go from here? That’ll provide some clues. So I think the same thing with Nvidia, because I think you can take a look at a lot of strong stocks and there are days in there that don’t look good, but the stock does manage to continue.

It’s run higher. I’m not saying that for Nvidia, this could be the top. We don’t know yet.

We’ll have to find out and act accordingly as new information presents itself. But today, no doubt a very bearish day here for Nvidia. Okay, moving on.

Let’s take a look at another stock that has been a standout, especially with its 2024 performance. And that is Applovin, ticker APP, Ed, down at 7% on the day, though it did close off of its lows. So, you know, hey, we’ll give it that closing range of nearly 50%, which is considered supporting action.

But again, still a big percentage decline on the day. Yeah, this one actually had some bad news. There was Bank of America had a note out there.

They’re basically sort of channel check, suggesting that its growth wasn’t as strong as maybe consensus. And so that was negative news on a day when you really see negative news. So I mean, I actually own this, but I bought it very recently.

And so I got out to get a tiny profit. I just said, you know, I’d probably be flat or a little down if I had held it through the whole day. But I would have had to sit through it.

Yeah, it could still hold on. It’s still consolidating. It’s not really doing anything wrong.

If you look on a weekly chart, it is now below the 10-week line, but just a little bit. I think that, you know, if you went below the recent lows, that would be more concerning. It’s for people who bought it, you know, maybe off the earnings or certainly way back down.

But if it decisively fell here, then you might want to think about taking some profits for sure if you hadn’t already. So yeah, it’s just on the whole. But it’s like, it’s scary.

This was down 10% at one point, you know, and it’s just like, and it doesn’t take very long for some of these names that have had big runs. Growth stocks will tend to lead to the downside too when the market turns. Because to put this digestion in perspective here, Ed, the stock is about 20% off of its highs from just a couple of weeks ago.

And before that, I mean, what a jaw-dropping move this stock had, a run of over 250% or so in such a short amount of time. So deserves a little break. It does.

And look, in another week, it could have a base. I mean, like this one could very well set up again. I just did something prudent because I was also just thinking, I want to reduce exposure.

I’m about to go under on a stock that is not going in there. So I’m just going to do that. But I think this one could set up again, certainly deserve a rest.

But yeah, I just, yeah, very interesting point right now for this stock. Yeah. You know, I think one could imagine some sort of cup with handle here.

We’ll have to see what shapes up over the next coming weeks. Okay. And then next on our list, we want to take a look at Netflix.

I would say all in all, Ed, a pretty chill day here for this one. Excellent day. I mean, this one is, and it’s not just an excellent day.

It’s like, okay, it would have been nice if it had participated in the last few days, but it’s grace, just gradually sliding down to the 50 day, 10 week line. Just really gentle there. You could imagine a bounce back, back above the 21 day line, back above the 900 level would look pretty good.

I think on a weekly, it’s going to have a flat base after this week. If it can hold anywhere in this range, it’s got a three weeks type, but that would end up being a flat base. So this is, you know, just, this is consolidating the way you’d love a stock to do after a strong run.

It’s because it’s not really doing anything wrong. It’s not shocking people, not scaring people, easy to hold. There are earnings in two weeks and you never know if there’s something bad news will come out, but this one just looks like just a steady performer.

And you know, you look at that up-down ratio, volume ratio, even though we’ve had a bunch of weeks on the downside, the up-down volume ratio is still a 2.0. I mean, so just really strong technicals for this name. Totally agree. I think this is a great stock for the watch list right now.

And I think the question here for traders is, okay, if we do get some sort of solid bounce and it’s actionable, that’s decision time. Do you want to try it out and see if there’s enough time to get some sort of profit cushion ahead of the earnings? Or is this going to continue to tighten up and wait for the earnings and not be the catalyst for the buy signal? So just something to consider there, as you mentioned, with the earnings two weeks away. Yeah.

And this one really moves on earnings. The last few have been fairly positive, but they don’t always end up that way. There can be some really big negatives.

So it’s chill until earnings and then it can really do something. Yeah. All right.

Well, thank you, Ed, as always for the analysis. We appreciate it. Thank you very much.

All right. And thank you all for tuning in. That is it from us for today.

But coming up at 5 p.m. Eastern today, we’ve got our Swing Trader status update show that’s live on Tuesdays with our Swing Trader crew. And given today’s action, they sure do have a lot to talk about. So you definitely want to tune in live on our YouTube channel.

And we also, of course, will post the video at investors.com slash videos after that wraps. So you have that to look forward to. And then we’ll see you in the morning on IBD live investors dot com slash IBD live for all the details on our daily morning live stream starting 10 minutes before the opening bell could be a critical day.

So we will see you there in the morning. Thanks everyone so much for tuning in. And we’ll see you back here tomorrow.