Oh boy, did it get ugly last week when stocks collapsed as the algos went into “sell mode.” I think someone hit the wrong button, but it was what it was. There were no surprises to speak of, with Nvidia Corp. (NVDA) blowing the roof off the house, writes Kenny Polcari, chief market strategist at SlateStone Wealth.
The economic data also continues to reflect the concerns that we have been talking about for months now: Stubborn inflation, tariffs, and a supposedly softening labor market. But remember how I have been saying that the recent push higher wasn’t making sense based on the conversation...
That the market appeared to be exhausted? That we needed to churn lower to consolidate? That we kissed S&P 500 highs at 6,175 three times (Jan. 24 and 31 and Feb. 19), but just couldn’t push up and through?
Nvidia Corp. (NVDA)
We kept backing off and then testing short-term trendline support only to bounce and kiss the high again…UNTIL WE DIDN’T. Then when we breached support, the algos (programmed to react to technical signals) went into sell mode. We then tested intermediate support and failed, only causing the sell algos to “shoot first and ask questions later.”
Last week’s dramatic selloff took NVDA down through both the intermediate- and long-term trendlines at $133.71 and $126.56. On Thursday, NVDA ended the day at $120.15, down 8.5% (and 21.5% below its recent high).
It’s now trading around a level ($120) that should offer support. But if the negativity continues then we could see the algos force it to $100 as buyers step aside. In the end, the algos can act irrationally – but therein lies the opportunity.
