WARNING: BOND YEILDS JUST HIT 20 YEAR HIGHS
In a Nutshell
Markets are flashing warning signs with 30-year bond yields at 20-year highs, rising inflation, and a weakening labor market, yet stocks remain overbought and irrational. Nvidia reports earnings tomorrow, but the speaker is holding existing shares under $100 and avoiding new buys at current levels around $220 due to poor risk-reward. The advice is to stay patient, avoid leverage, and hold cash to buy good deals during potential sell-offs.
These notes were generated by AI and may contain inaccuracies.
Markets are slightly in the red but beginning to show signs of possible support. Markets have consistently shown signs of lower lows and lower highs for the second day in a row. There is a really big day tomorrow with Nvidia reporting earnings. Markets are incredibly overbought on the 4-hour time frame with huge downside potential. Markets have been irrational despite terrible news including a weakening labor market and rising inflation.
The US 30-year Treasury bond yields have risen to 5.18%, the highest level since July of 2007. This is the highest level in nearly 20 years. There was also an update that Iran's proposal to the US includes a list of demands that Trump is not going to accept. Markets continue to push higher despite these red flags.
Nvidia is reporting earnings tomorrow with market expectations of $1.75 earnings per share and revenue estimate of 78.82 billion. Nvidia is a challenging stock to bet against because it often exceeds market expectations. However, even when Nvidia reports better than expected earnings, the market reaction is not always positive. The question to ask is whether it is a good enough deal to buy before earnings for potential upside, or if it is overbought enough that it is not worth the risk.
The speaker is invested in Nvidia at less than $100 per share and does not want to buy more at current levels around $220. With all the red flags including bond yields at elevated levels, rising inflation, weak labor market, and tensions in the Middle East, the speaker is okay sitting on the sidelines with existing investments and holding cash to pick up good deals if markets sell off. The goal is not necessarily to short the market but to invest when good deals present themselves, which is hard to find in tech right now.
Weigh out profit potential versus downside risk. The risk-to-reward ratio calculator helps plan trades by calculating entry, stop-loss, exit, and number of shares to determine potential gains versus potential losses. It is important to understand exposure before taking a trade. The speaker does not trade options and prefers to buy shares. Nvidia is not a good enough deal at current elevated levels to add more positions.
There is still 9.1% of potential upside according to Investing Pro. Nvidia is a very well-run business with incredible revenue and impressive net margins. Net income is more than 50% with $120 billion in net income and $215 billion in revenue. The P/E ratio is elevated at 44.6 times earnings.
In today's live trading session, Micron was shorted as it sold off and it was a beautiful overbought short. Viewers who are part of the LPP team can rewatch the session. Those interested in joining can message on Instagram to receive today's live trading session link, provided they have never received one before.
The NASDAQ market does not seem to care about the red flags and is acting incredibly irrational, trying to go back into the green. The market behavior is similar to yesterday where it sold off a little bit and then began to recover. Markets may derisk before close, which is important to watch since tomorrow is Nvidia earnings day. The 30-year yield at nearly 20-year highs is never a good sign. Be very careful and avoid being leveraged while being aware of position size.
Investing Pro is used for deeper analysis both technically and fundamentally. There is a sale right now over 55% off, bringing the cost to $8.95 a month. The question to ask is whether having access to the information is worth at least $9 a month. The link is the first one in the description.
Be very careful as markets can quickly shift direction especially when there is a lot of greed and uncertainty presenting at the same time. Stay patient and stay calculated. When in doubt, never be afraid to cash out. The goal is to end the year on a green note.
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