Although you don’t get an alert to sell when the market reaches a top, sometimes it becomes pretty obvious, according to Ritholtz Wealth Management's Josh Brown, who believes it is currently in one of those times.
“They don’t ring a bell at the top, but sometimes they sort of do,” Brown said Tuesday on “The Compound & Friends” podcast.
What To Know: The Nasdaq 100 gained more than 50% in 2023 and is already off to a hot start in 2024 amid increased focus on operational efficiency and continued optimism surrounding the advancement of AI.
Brown believes the market needs some time to breathe and although he said he doesn’t call tops, he made a pretty bold call about where the market is likely headed, at least in the short term.
“I would say there’s a better than 50% chance that the Nasdaq has topped for the year. I would say I am 100% certain, 99% certain that the Nasdaq has topped for the quarter … I think we have a lot of digestion to do in the Nasdaq 100,” Brown said
Nvidia Corp NVDA is a great example of the frenzied buying in the market right now, Brown said, adding that $40 billion worth of Nvidia stock is being traded on a daily basis.
“It’s an algorithm casino … it’s like a ridiculous maelstrom of activity that serves absolutely no economic purpose,” Brown said. “The whole thing has just become such a freak show and that doesn’t happen at bottoms or in middles, that only happens at, at least short-term, tops.”
Last week, Brown announced that he trimmed his Nvidia position for just the second time since 2017, noting that the chart “went vertical” and it felt like people had “lost their minds.” Nvidia shares closed 2023 up 239% and the stock is already up another 47% since the start of the year, per Benzinga Pro.
Several other mega-cap tech names have made similar moves over the last year, which Brown suggested positions the risk to the downside.
Several things are going on right now that are contributing to Brown’s sentiment on the market, especially the Nasdaq 100. Amazon.com Inc AMZN founder and chairman Jeff Bezos sold $2 billion worth of Amazon stock last week, OpenAI’s Sam Altman is reportedly seeking trillions of dollars for AI development and several chip-related stocks have doubled or tripled in a matter of weeks, he said.
“The level of enthusiasm required to get a company the size of Arm to double in three days on 10 times normal volume, you just cannot get that in anything other than at least a short-term top,” Brown said.
“Can we all relax? I’m very excited about AI, OK? I’m in the club, I’ve been talking about this sh*t before most of you were born. Let’s just calm down though. That’s all I’m saying.”
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