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Is Nvidia the New Y2K?


Now that the debt ceiling threat has been ‘resolved’, we’re out of the woods, the coast is clear.


Just like the exhale after the Y2K Wall of Worry in early 2000 was mounted… right?

This is the 2023 version of  technology’s 2000 blow off, as we noted in this space in May.

This year has seen the largest outperformance in Tech relative to the SPX since the year 2000.

In 2000. once the specter of Y2K proved to be an illusion, speculation spiked.

It’s as if market participants have front run the debt deal on the presumption that there was no choice by to get a “deal”.

Spearheaded by the likes of NVDA and MDB, what do tech stocks do for an encore?

It must be said that NVDA now trades at over 38X sales and over 200X earnings. There has never before been a price to sales ratio that high for a company of its size ($1 trillion market cap).

This is the time to remember what Scott McNealy, CEO of Sun Microsystems told Bloomberg just after the Dot Com Bubble burst in 2000.

Could select tech mania extend into our major turning point this summer or even spread out into the broad market?


This week should tell the tale.

One reason being the time factor.

The QQQ blow-off into the Spring Equinox in 2000 was 22 weeks.

From the January 2023 low, last week marked 22 weeks of a fierce rally from 260 to 356.

Below is a weekly showing the advance into the 2000 top.

The following chart is the QQQ advance in 2023.

The QQQ bottomed in October at 254.

A 360 degree price cycle higher is 321.

Notice the price action after 321 was struck on March 31st.

QQQ carved out a high level consolidation for a month before attempting a breakout on April 28th.

The first attempt fizzled followed by a pullback into the high level consolidation.
The second mouse got the cheese starting on May 5th with the rest of May seeing a run for the roses.

90 degrees up from 321 is 340.

As Hit and Run wrote on two weeks ago, there was a strong likelihood that QQQ would clear 340 satisfying a complete 540 degree

Advance to 358.

This is because a true square is a 3 dimensional cube of 540 degrees (9 sides of 90 degrees).

With QQQ hitting 355.83 on Friday, this is another reason why this week will tell the tale of the tape.

While the NDX (the underlying of the QQQ’s) exploded to a higher high over its early Feb high, the NDX cumulative A/D line has not.

The NDX made a countertrend high on February 2nd and had not exceeded that mark as the NDX continues to rally.

This is unhealthy and unsustainable. It has not mattered… yet. As W. D. Gann wrote, “When Time is up trend turns.” The divergences have confounded the bears and converted many of them to the bull camp.

As a friend and fellow trader mentioned to me over the weekend, “it is at times like these when the market makes no sense  and my frustration high,  that it has often turned.”

How about the geometry of the SPX?

The SPX low for the move since the January 2022 peak was 3491.

Moving the decimal point to work with the Square of 9 Wheel we get 349.

360 degrees up is 428. Friday’s high was 428.74 with a close at 427.92.

The move occurred on a 2 day spike and in my experience, when a “square-out” such as the SPX and QQQ is satisfied on a spike versus a slow grind up or down,  it is usually significant. It often indicates exhaustion and a buying climax, at least in the short-term.


You decide, note how 349 squares Oct 11. The low for the move off the all time high was October 13th. The low close was October 12th.

Interestingly the March 2000 peak was 23 years ago.

On the Square of 9 the number 23 points to June 21st, the Summer Solstice.

Is it possible the SPX/QQQ rally extends into the ‘natural’ pivot of the Summer Solstice just the Spring Equinox defined the high in the year 2000?

It must be noted that in 2000, the SPX struck its high on March 24th but the NAZ found high earlier on March 10th.

This week will be telling.

The news breaks with the cycles:

The U.S. Treasury is about to unleash a tsunami of new bonds to refill its coffers.

Market returns have been negative following large drawdowns of bank reserves.

The bottom line: risk is rising —with emotion—whether we find a high this week or extend.
The most important factor underpinning an approach to the market is the question of how much risk you want to assume at any given time.

Is the market currently in a position where it makes sense to take on more risk?

That is part of the Mr. Market’s enigma as the fastest moves come at the end of runs—either up or down.

So the most money is made at the end of moves, causing players to overstay their welcome with the “easy” gains.

This is why emotions can get the best of us.

In my experience at potential major turning points, I have found that it is one thing to be intellectually bearish and another to take long positions as they setup because Hit and Run is playing 1 to 5 day momentum moves for the most part.

With speculative juices flowing again and bullish emotions running hot that the SPX breakout over 4200 and the NDX breakout over last August’ high has “proven” we’re in a new bull market, I will remind you that the SPX “broke out” in October 2007 prior to a debacle.

Ditto IWM broke out in October/November 2021.

I am not a believer in the new bull market narrative.
To the contrary my work suggests new lows below last October’s low are a strong likelihood.

For two reasons: cycles and the structure of the rally looks corrective (counter-trend) versus impulsive.

With that in mind, the question I think you should ask yourself is not whether this is a good time to assume risk but whether is it a good time to reduce risk and sell.

On Friday, the SPX filled a gap from August as it gapped open.

Offsetting Friday’s gap at 4233 and sticking below it will open the door to a larger decline.

If that occurs it will be important to consider whether a waterfall into the Gann Panic Zone is unfolding.

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