| Wednesday, February 21

Here's Everything You Need To Know Today

After weeks of this rally showing signs of an approaching peak—The Street is bracing for a make-or-break moment tonight.

The NASDAQ is trading with a lot of volatility after Palo Alto Networks ($PANW)—the sure-fire king of cybersecurity—reduced their guidance for 2024 in last night’s Q4 earnings report. Palo Alto Networks has been pretty heavily hyped in the last few months, and as such they became a primary stock that traders bought into the rally a little too hard.

So, all the short-term alpha at Palo Alto Networks evaporated in premarket trading and the stock pulled a sharp correction early today. But PANW’s guidance is still well within ranges to keep us bullish long term. More importantly: this pattern of a company getting a little overbought only to correct thanks to more realistic predictions for 2024 is playing out across the market. Wall Street spent January laying down bets.

But the big show hits after the market closes today with Nvidia teeing up a pivotal Q4 earnings report of their own. Of all the stocks powering this recent buying spree—Nvidia is one of the hottest. If Nvidia keeps finding a way to meet ever-higher expectations, that will keep this rally running hot. However, if Nvidia follows the more average pattern of posting more realistic 2024 predictions that come below The Street’s stratospheric expectations, we’ll potentially see a wave of correction hit the AI sector.

In the long term, this will be a positive moment for the rally. The last thing we want to see is the market devolving into full mania, and more realistic expectations for our recovery sets us up for a longer, much more sustainable rally as the Fed prepares for eventual rate cuts.

Of course, AI could still be the transcendent technology we all think it is and Nvidia can send the NASDAQ soaring ever-higher tonight too. The only true constant in periods of transition like this is volatility. Day traders are in for a bloodbath while folks with a longer-term time horizon are simply going to get hit with a little variance. Either way, gear up for hot takes and hotter price action while The Street decides if this is the top or not.

Let’s focus on the longer-term trends and market mechanics powering this topping process so we can try to stay above the noise.

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