'Warning Flags': Expert Says Nvidia In 'Bubble-ish Territory,' Points To Potential Market Pullback

Amid the SPDR S&P 500 ETF Trust‘s SPY historic performance in 2024, one market expert joined Benzinga’s PreMarket Prep on Monday to point out several “warning flags” in the markets.

Potential Market Pullback: Craig Johnson, CFA, CMT is a managing director and chief market technician at Piper Sandler.

The 2024 rally is a rare example of the market outperforming Piper Sandler’s price objectives. Although the S&P 500 has appreciated by over 15% in 2024, Johnson is skeptical that the market’s performance can continue.

He cited several technical indicators that could be worrisome signs for investors. Despite the S&P 500’s performance, Johnson pointed to the fact that approximately 58% of stocks are in downward trends rather than upward trends. He is also discouraged by the fact that just over 50% of stock groups are above 40-week moving averages.

“If you’re buying like Dennis [Dick], you said buying the new highs list, that’s fantastic, but there’s a lot of things out there that are not working,” Johnson said. “You’ve got a larger percent of this market that is not working than working at this point in time. And again, that’s sort of the bigger challenge for me.”

Johnson said that he is largely sitting out this market uptrend in fear of a larger market pullback. He also predicted that the next 10% market move is likelier to be downward than upward.

“I have the belief that there’s a time to make money and there’s a time not to make money… and there’s an easy time to make money and there’s a hard time to make money,” Johnson said. “This to me feels like a harder time to make money because everybody’s chasing the same handful of stocks and when that sort of party ends, it’s going to be painful.”

NVIDIA Performance: NVIDIA Corp NVDA has had a banner year in 2024, crossing the $3 trillion market cap mark while appreciating over 140%. Johnson believes that now, while the stock is in “bubble-ish territory,” could be a good time to take profits on its performance.

“I don’t need to be overly greedy on a stock that has clearly gone parabolic. It doesn’t mean that it’s over yet, but everybody has the same approach out there, which is, ‘I am going to wait until things roll over and then I’m going to sell. I’m going to be watching this and I’ll be able to get out before everybody else does.’ It really doesn’t work that way. When the selling starts, people don’t want to sell… they keep saying that all the way back down.”

Market Alternatives: Johnson says that he has not exited the semiconductor trade—he’s purchased Micron Technology Inc MU and Taiwan Semiconductor Mfg. Co. Ltd. TSM. He also pointed to Dollar General Corp DG and Dollar Tree Inc DLTR as equities he is watching closely.

Johnson believes that cash is increasingly attractive, along with stocks paying dividends.

Also Read: NewEdge Wealth’s Cameron Dawson Talks Prolonged High-Interest Rates On PreMarket Prep

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