There’s a big story brewing right now around Nvidia (NVDA)…
And I don’t see anyone else talking about it.
It’s the rebalance front-run.
This happens about every three to four years with some massive tech stock.
Sometimes it’s Apple, Amazon, and Facebook. Other times it’s Tesla and Google.
Right now it’s Nvidia’s turn…
Nvidia
NVDA has rallied 70% in roughly eight weeks.
This has only happened a handful of times in the bull market.
And it’s not about AI or chips…
It’s about the explosion of demand from ETF custodians.
Right now, NVDA accounts for 8.5% of the Nasdaq 100. It’s now the highest weighting, edging out Microsoft and Apple.
This is a classic market-cap convexity squeeze.
As NVDA rallies, it accounts for a larger weighting in the index, and the ETF custodians are then forced to buy more shares to get the rebalance right.
There’s also another tech ETF – ticker XLK. It’s a SPDR ETF run by State Street…
And NVDA is now a 20% weighting in it.
Institutions have known this was coming… and have either bought in to front-run the rebalance, or are avoiding any kind of short exposure so they don’t get run over.
Yet we are coming down the pipe, and the rebalance trade is almost finished.
Couple that with the recent stock split, and I wouldn’t be surprised if demand dries up and we see a hard pullback.
I’m not calling for a crash. I’m just pointing out that the liquidity characteristics we’ve seen in the stock are going to change quickly, and most investors are not going to be prepared when that pullback happens.
As institutions begin rebalancing, they’re going to leave signals in the market – almost like footprints.
Knowing how to spot them can help you avoid the big selloffs, while staying ahead of potentially major runups.
It’s how we’ve gotten ahead of moves like a 78% jump in Home Depot stock in two months…
And a 3,400% gain in Tesla in just three months.
It’s also how I called the bottom of the Covid selloff to the day.
I put together a no-cost training webinar that breaks it down step by step…
And show you some of the newest opportunities it’s signaling right now.
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