Nervousness ahead of Nvidia results

The indices were broadly flat yesterday on no news, volumes remain low reflecting the 'holiday' season and the fact that the Market is waiting for Nvidia results release after hour today.

The VIX was flat yesterday at 15.6 - it hit 65 intraday on 5 August, its highest level since Covid in 2020. DJIA +0.02%, S&P 500 +0.16% and Nasdaq +0.16%. On an equal weighted basis (our measure) the overall market was down -0.64% reflecting softness in the smaller end of the Market, breadth was 36% (vs 12% on 5 August and a high of the mid 80s% at the end of July) and daily volumes of 6.2b (vs the average daily volume over the last year of 7.9b). Looking at stock performance only the mega cap stocks ex Mag7 traded in positive territory suggesting a shift to relative safety ahead of the Nvidia results.

One day returns as follows on an equal weight basis: Mag7 -0.37%, large -0.02%, medium -0.37%, small -0.66% and micro -0.87%. On a 1 and 2 week equal weight basis; Mag7 -1.8% and +2.1%, Large caps +1.4% and +3.8%, Medium cap +2.0% and +3.5%, small cap +2.6% and +5.2% and finally Micro cap +2.4% and +5.4%.

On a weekly basis the market was flipping between favouring large caps to back to small/micro the following week. Our risk monitor remains in favour of the larger cap stocks but the benign Market is increasingly favouring Micro and Small. Micro Cap stocks had positive relative momentum four weeks ago, this reversed post release of the July nonfarm payroll figures. However over the last two weeks (yesterday excluded0 the Market has increasing favoured Small and Micro stocks the one week differential has now reversed in favour of the Micro stocks at +1.0%.