S&P 500 is climbing a ‘wall of worry' — but Nvidia is now a real concern

Lawrence G. McMillan's analysis indicates the S&P 500 (SPX) remains in a bullish mode, finding support despite early September volatility, with equity-only put-call ratios and implied volatility indicators signaling buys, though some internal breadth and volatility metrics remain mixed. Conversely, Nvidia (NVDA) shows negative indicators, including a put-call-ratio sell signal, suggesting its recent rally may have peaked. Meanwhile, gold (GC00) has generated a new put-call-ratio buy signal, recommending a long position via GLD, presenting a nuanced market outlook of continued broad market upside potential alongside specific sector caution and new opportunities in commodities.

Analysis

The S&P 500's primary trend remains bullish, having established a support base in the 6,340-to-6,360 area that sets the stage for a potential move to new all-time highs. However, this outlook is tempered by conflicting internal indicators, creating a classic 'wall of worry' scenario. Positive signals include a new buy signal from weighted equity-only put-call ratios, the continued outperformance of new highs versus new lows on the NYSE, and a bullishly sloped VIX futures term structure. In contrast, negative signals persist, including an active McMillan Volatility Band (MVB) sell signal, weak market breadth oscillators, and a recent realized volatility sell signal triggered when the 20-day historical volatility (HV20) rose to 12%. Amid this mixed market, a significant bearish divergence is identified in Nvidia (NVDA), where indicators have turned negative and a put-call-ratio sell signal suggests its recent momentum has peaked. Conversely, a new put-call-ratio buy signal has emerged for gold (GC00), indicating a tactical opportunity despite its recent price appreciation.

Key Decisions for Investors

• Maintain a cautiously bullish exposure to the S&P 500, acknowledging the positive primary trend while closely monitoring the negative divergences in breadth and realized volatility as potential warning signs.
• Consider hedging or reducing long positions in Nvidia (NVDA), as technical indicators, including a specific put-call-ratio sell signal, suggest a sentiment shift and a potential near-term top for the stock.
• Evaluate initiating long positions in gold, potentially through call spreads on the GLD ETF, to capitalize on a new put-call-ratio buy signal that has emerged even after the commodity's recent rally.
• Use a sustained VIX close above its 200-day moving average, currently at 19.10, as a key risk-off trigger that would negate an important underlying buy signal for equities.