Nvidia (NVDA) Tops Estimates

• It was crucial the current uptrend channels held to start the week with volatility easing, or at least holding key resistance. While there was a little wiggle room for some stretch, Tuesday’s 2% market rebound remained an ongoing bullish signal as key resistance levels were cleared, or challenged.
• Wednesday’s slight pullback kept the blue-chips below the 200-day moving average. The S&P and the Nasdaq cleared their 200-day moving averages on the May 12th breakout. The small-caps remain trapped between the 50-day and 200-day moving averages but could catch fire if the mid-month high is cleared.
• Dow component, Nvidia (NVDA), announced earnings after Wednesday’s close that topped Wall Street’s forecasts. The company posted an adjusted profit of $0.96 a share versus expectations of $0.93 a share. Revenue of $44 billion also cleared estimates for a print of $43.3 billion.

The stock market rebounded on Tuesday following a three-day holiday weekend to keep the current uptrend channels intact. Wednesday’s slight pullback came ahead of Nvidia’s earnings as traders were hesitant to put fresh money to work.

The Nasdaq closed at 19,100 (-0.5%) after testing a low of 19,084. Key support at 19,000 held. Resistance is at 19,250.

The S&P 500 reached a peak of 5,939 before settling lower at 5,888 (-0.6%). Support at 5,800 held. Resistance is at 5,950.

The Dow finished at 42,098 (-0.6%) with the intraday low at 42,042. Support at 42,000 held. Resistance is at 42,250.

Earnings and Economic News

Before the open: Best Buy (BBY), Burlington Stores (BURL), Foot Locker (FL), Kohl’s (KSS)

After the close: American Eagle Outfitters (AEO), Dell Technologies (DELL), Marvell Technology Group (MRVL), Zscaler (ZS)

Economic news:

Initial Jobless Claims – 8:30am

GDP – 8:30am

Pending Home Sales – 10:00am

Technical Outlook and Market Thoughts

It was crucial the current uptrend channels held to start the week with volatility easing, or at least holding key resistance. While there was a little wiggle room for some stretch, Tuesday’s 2% market rebound remained an ongoing bullish signal as key resistance levels were cleared, or challenged.

Wednesday’s slight pullback kept the blue-chips below the 200-day moving average. The S&P and the Nasdaq cleared their 200-day moving averages on the May 12th breakout. The small-caps remain trapped between the 50-day and 200-day moving averages but could catch fire if the mid-month high is cleared.

The Nasdaq remains in a 12-session trading range between 18,500-19,250 following the May 12th breakout. Wednesday’s multi-month peak reached 19,276 with closes above 19,250 confirming a possible push towards 19,750-20,000.

A close below 18,500 and the 200-day moving average would be a slightly bearish development with additional weakness to 18,250-18,000.

The S&P 500 is also in a 12-session trading range between 5,800-5,975 with Wednesday’s top at 5,939. Multiple closes above 5,975 and the monthly peak at 5,968 would indicate ongoing strength to 6,000-6,100.

Key support is now at 5,850. There is stretch down to 5,800 and the 200-day moving average on a close below this level.

The Russell 2000 traded up to 2,114 on May 16th with Wednesday’s peak at 2,092. The March 24th and 25th hit a double top high at 2,110 with more crucial resistance at 2,135. This level failed to hold as crucial support on the March 1st 3% selloff in the index. If all of the aforementioned levels are cleared and held, there is potential for a resumed and quick v-shape recovery up to 2,175-2,200 and the 200-day moving average.

Key support is at 2,050. A drop back below this level would suggest a retest to 2,000 and the 50-day moving average.

The Dow cleared its 200-day moving average on Wednesday but a level that has held both days this week. Multiple closes above 42,250 gets 42,750-43,000 back in play with the prior Monday’s peak at 42,842.

Key support is at 42,000 with backup help at 41,750-41,500. A close below 41,000 and the 50-day moving average would imply a near-term top for the blue-chips.

The Volatility Index (VIX) fell 15% on Tuesday and closed back below key support at 20. The more important target remains at 17.50 with multiple closes below this level confirming a run to all-time highs for the major indexes. There was one close below 17.50 on May 16th after this level was tested seven-straight sessions earlier this month.

Any move, or close, on the VIX above resistance at 24, or 26 and the 50-day moving average, should be taken seriously, as it would be a bearish development for the market.

Dow component, Nvidia (NVDA), announced earnings after Wednesday’s close that topped Wall Street’s forecasts. The company posted an adjusted profit of $0.96 a share versus expectations of $0.93 a share. Revenue of $44 billion also cleared estimates for a print of $43.3 billion.

Shares were up 5% in after-hours action and above $141. This should lead to a positive open for Thursday, providing the gains hold.