The rally continued Wednesday, Nvidia down after earnings

08/28/25

The stock market showed a lot of green yesterday with small caps leading the pack again, but the I-fund suffered with the dollar moving higher in early trading. Bonds were up as yields rallied. After the bell yesterday Nvidia reported earnings and it was down modestly in after hours trading.

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Nvidia barely beat their earnings estimates but they were down about 3% after hours. But the fact that their revenue was up 56% over last year, after the growth they've experienced in prior years, is remarkable. That takes it all the way back to prices not seen since.... last Friday! This chart shows the prior four earnings releases and what happened to both Nvidia, which was down initially each time, and the S&P 500 afterward, which was not very consistent. Translation? This report probably won't do much to impact the stock market, although the Nasdaq and S&P 500 futures were down when they opened after the release of the report.

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The S&P 500 / C-fund made another new closing high yesterday but it is still basically near those highs. Nvidia's losses overnight may not be devastating to their stock price, but the S&P 500 has been relying heavily on those big companies to keep it near the highs, so we'll see what happens today with Nvidia's disappointing reaction to earnings. There are plenty of other indications that this rally can continue, but at the same time a lot of time tested indications show us the market could be ready for a pullback, although that has not been the case for most of this month.

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The PMO indicator is one of those indicators showing a negative divergence for a couple of months. It has been moving steadily lower while the S&P 500 has moved up. This is typically bearish, but it hasn't been yet.

Another odd phenomenon that I have mentioned before is the fact that the stock market is at an all time while, while the safety trades of bonds and gold are also at, or near their highs.

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I asked Grok (AI) what this means and here is the abbreviated response:

"When stocks, bonds, and gold are all reaching new all-time highs simultaneously, it typically signals a unique market environment driven by abundant liquidity, supportive monetary policies, and a mix of optimism and caution among investors. This combination is relatively uncommon because these asset classes often respond to different economic drivers—stocks to growth and corporate earnings, gold to uncertainty or inflation hedges, and bonds to interest rate expectations (where high bond prices imply falling yields). However, historical analysis suggests this scenario is generally bullish for markets rather than a warning sign.

"This phenomenon often occurs during recovery phases or when the Federal Reserve signals rate cuts, as lower rates historically boost gold and stocks while supporting bond prices. It doesn't inherently mean a recession is imminent; instead, it frequently precedes extended bull markets, as new highs in one asset class (like stocks) tend to be followed by more highs rather than reversals. Investors might view it as a cue to maintain diversified portfolios, favoring equities for growth potential while using gold and bonds for hedges.

"In summary, rather than a red flag, this alignment is often a green light for continued market strength, fueled by policy support and resilience—though vigilance for inflation or policy pivots is advised."


It's rare, but potentially. Maybe we shouldn't fight it?

Yields were down yesterday as the 10-year Treasury Yield continued its downward trend after failing at the moving averages. This is helping set up favorable conditions for stocks. This type of wedge or pennant formation tends to break to the downside. It's actually an upside down cup and handle.

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The dollar was up sharply early yesterday but it closed almost flat creating a negative reversal, although technically up on the day and the neckline of the inverted head and shoulders pattern continues to be a key pivot point - as was the 50-day average in purple.

We get an update to the second quarter GDP data today, which of course is rear-view mirror data, although I guess we could say that about all economic data. On Friday we'll get the PCE Prices inflation data, along with Personal Spending and Income data.




The DWCPF / S-fund rallied to new highs again. It may stay in that tighter channel for a while like it did in July, but once that blue line breaks, we should see another test of the lower end of the red channel - which is rising, almost in sync with the 50-day average.

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ACWX (I-fund) lost ground but closed near its highs of the day as the dollar reversed its morning rally to close flat. That 62.50 area looks like key support and the barrier between staying near the highs and filling in some of those open gaps below.

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BND (bonds / F-fund) continues to slide higher but we are getting mixed signals from the bearish rising wedge pattern and thebull flag that has clearly formed.

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Thanks so much for reading! We'll see you back here tomorrow.

Tom Crowley


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