Conclusion, Investment Implications, Strategy

This week’s emerging breakout higher in market-leading market cap behemoth NVIDIA (NVDA) targets an additional 18% rise to 169.00, which suggests that an upcoming rise to corroborating new all-time highs in both NASDAQ Indexes (COMP, NDX) is likely in the weeks ahead.

NVDA Breaking Out From June Indecision

The upper panel of the chart below plots NVIDIA (NVDA) daily since January with its 200-day moving average, a widely-watched major trend proxy.  The lower panel plots a corresponding relative performance chart of NVDA versus the S&P 500 along with its 63-day moving average, which we use to determine NVDA’s quarterly trend of relative performance versus the broad market.

NVDA daily since January 2024

The green arrow in the upper panel shows that NVDA broke out higher from almost four months of sideways investor indecision on Oct 7th to indicate that its larger January 2023 major uptrend, as defined by the 200-day MA, has resumed.  This breakout from indecision targets an additional 18% rise to 169.00 per share that will remain valid as long as the top of the indecision area (blue highlights), currently situated at 123.38, holds as underlying support.

More recently, the green ellipse shows that NVDA broke out to new all-time highs yesterday and thus far today, clearing the way for more strength in the weeks and potentially months ahead.

This recent breakout higher by NVDA is particularly important because NVDA, as the 2nd largest stock according to market cap ($3.4 T, just below AAPL at $3.6 T), is extremely influential to both market-leading NASDAQ  Indexes as well as the broad market S&P 500.  Specifically, NVDA and the NASDAQ Composite Index (COMP) have maintained a positive linear correlation of between 0.76 and 0.97 throughout the past 25 years, most recently a nearly lockstep 0.90 over the past three months. 

So, according to the data, as goes NVDA so should go Technology and the US broad market that it tends to lead.  Moreover, even though COMP and the NASDAQ 100 (NDX) have not yet risen above their summer highs, the fact that influential NVDA has already done so suggests that either COMP and NDX are likely to follow suit soon, or that 25 years of nearly lockstep positive correlation between NVDA and COMP is likely to break down in the weeks and months ahead.