OVERVIEW
The Most Significant Earnings Report

Investors across the board, from everyday retail traders to large institutions, are all zeroed in on one key question: Will Nvidia meet expectations in its earnings report today?

The $3.2 trillion AI giant's results will be a crucial indicator of both AI spending and the broader tech market's health. Data from the analytics firm ORATS shows that options pricing suggests traders are bracing for Nvidia's stock to swing by about 9.8% on Thursday, the day after the earnings release. This anticipated move is not only larger than any before an Nvidia report in the past three years but also significantly higher than the stock's average post-earnings movement of 8.1% during that period.

To make matters more complex, there's an overwhelming sense of optimism surrounding this earnings report. While Nvidia has consistently delivered impressive rallies and growth rates more typical of smaller, fast-growing companies, this heightened optimism can actually work against it.

When expectations are sky-high, even if Nvidia hits the analyst forecasts, it might not be enough to satisfy investors. This is because the market often prices in not just meeting expectations, but exceeding them. If Nvidia "only" meets the forecasts, it could be seen as a disappointment, leading to potential stock volatility against the bullish case.

The higher the anticipation, the greater the risk of falling short in the eyes of the market, even if the company's performance is solid.

So, what does all of this mean for today’s session?

Chances are, today’s market won’t see much action. Most traders will likely be holding back, waiting to see how Nvidia’s earnings report plays out later today. We expect a slow session with little excitement or major moves until the report is released.

Nasdaq

The Nasdaq is currently holding its daily 10-EMA as it prepares for a key event this quarter—Nvidia’s earnings report.

From a technical perspective, we're seeing significant resistance at the $483 level, with the QQQ now testing the lower end of this range at $476. This suggests we’re at a critical juncture, with the market consolidating within a narrow $10 range over the past week. This kind of consolidation is typical after a strong run-up, like the one we saw from early August. However, this doesn’t necessarily indicate it's the best time to increase long positions, even without the earnings report.

It’s wise to wait and see how the market responds tomorrow. Depending on the outcome, we might see a sharp sell-off down to the 200-EMA or a move to new all-time highs for the Nasdaq. Positioning yourself now without more information could be quite risky.

S&P Midcap 400

The midcaps are also showing signs of topping out, with yesterday’s gap down causing the MDY to move closer to its point of control (POC) at $555, which aligns with the rising 10-EMA.

This gap down isn’t overly concerning since we’re still trading above the daily 10-EMA. However, we might start seeing some notable rallies or breakouts, potentially leading to either the formation of secondary volatility patterns before another upward move or the beginning of a downward trend. Of course, much of this will hinge on Nvidia’s performance tomorrow.

For today, we don’t expect much action. The MDY will likely trade sideways and consolidate, possibly even dropping to test the rising 10-EMA for support. Demand should ideally kick in around this level to help keep the MDY from falling further.

Russell 2000

The small caps also faced a rejection at their point of control (POC) at $223, leading to a gap down to the $218 demand zone. This level has managed to support the IWM and prevent a more significant sell-off.

The volume from yesterday doesn’t suggest that the rally is “over”—it simply points to profit-taking at a key resistance level. There wasn’t a high volume event that signals a major trend reversal.

We might see the IWM dip further to its rising 10-EMA at $216, but this wouldn’t be alarming. Instead, we anticipate that the IWM will trade sideways for now. We believe the IWM is likely forming a secondary volatility contraction pattern (VCP) on the daily chart, which could set the stage for a push higher in the coming week.

However, keep in mind that this analysis is purely technical and doesn’t account for potential impacts from Nvidia's earnings report tomorrow. If Nvidia’s performance leads to a broader market decline, it could negatively affect the small caps, just as it might with the MDY and QQQ.

We’ll revisit this with a detailed plan in tomorrow’s morning report.

DAILY FOCUS
Hold Off Until Tomorrow

In short, Nvidia's earnings report is carrying significant weight for the overall market sentiment, especially since it's the largest stock in the Nasdaq. Given that the QQQ index, which is capitalization-weighted, tends to move closely with Nvidia, it would be risky to open new positions before the report is released after hours today.

The "smart" approach would be to wait until tomorrow's premarket activity, where you'll have a clearer picture and can decide whether entering a position in Nvidia makes sense.

This might sound a bit dramatic, but keep in mind that Nvidia represents 7% of the S&P 500. If its share price takes a dive—combined with the implied volatility of around 10%—it could create a challenging environment for any trades you make today, even if they seem unrelated to the AI chipmaker.

We will discuss the Nvidia trade more in tomorrow’s report, as well as how we will be looking to play the stock on a positive reaction as an earnings based episodic pivot.

Stock To Watch
Nothing For Today

We stand by our pre-market analysis and currently don’t see any promising setups for today that we’d recommend trading.

Here’s something crucial to understand, as it can significantly impact your success as a trader:

Trading more doesn’t necessarily mean earning more.

You don’t need to constantly be clicking buttons and entering or exiting trades. Think of yourself as a portfolio manager first. Most of the time, your role is to wait. You might be holding a portfolio of stocks (like the six we currently have) that are showing potential, and your job is to let these trades play out. Or, you might be in a “risk-off” position, holding nothing and waiting for the best opportunities to arise.

In trading, asymmetry is key. The goal is to find setups where the potential reward far outweighs the risk and with Nvidia tomorrow, now positions today are not worth it.

Go over your past trades or trades you missed and refine your edge, new opportunities will come either with Nvidia as an earnings based episodic pivot tomorrow, or something else.