Market activity is slowing down as traders await Nvidia’s (NVDA) earnings report. Total notional volume fell from $13.4 billion to $2.7 billion, and premarket volume dropped by 58%. The number of active stocks also fell by 54%, indicating a cautious approach among traders. Expensive stocks are gradually declining, with down movers at $9.1 billion compared to $4.3 billion for up movers, even though up movers make up 67% of traded shares. Currently, dollar flows are nearly equal between down and up movers, but there’s a trend of investors moving away from higher-priced stocks in favor of lower-priced options.

Market Breadth And Up-Volume

Market breadth fell from +359 to -212, hitting -6 today. This shows a lack of active trading and a reluctance to take risks. Daily up-volume remains strong, making up 82% on Friday, 67% on Monday, and 72% today, which indicates that buyers are concentrating on lower-priced stocks. Large-cap indices appear somewhat vulnerable since dollar flow is shifting away from pricier stocks. However, the consistent up-volume suggests that there is still interest in cheaper stocks. Traders should keep an eye on dollar flow and market breadth, as unexpected positive results from NVDA could lead to sharp market reactions. As everyone waits for Nvidia’s earnings, participation in the market is dropping. The pre-market activity shows a quiet exit from expensive, large-cap stocks, while buying continues in cheaper ones. For those trading derivatives, this means implied volatility is high, making options more expensive before this significant event. This uncertainty is reflected in the CBOE Volatility Index (VIX), which recently increased to 17.5, up from a low of 14 last month. Moreover, the latest Consumer Price Index (CPI) report from July 2025 came in at 3.4%, slightly above expectations, which keeps the Federal Reserve’s next steps unclear. This environment contributes to a cautious stance on large-cap stocks before Nvidia’s earnings.

Historical Precedents And Strategies

A similar situation occurred ahead of the August 2024 earnings report, where traders also took a conservative stance. After that report surprised positively, the Nasdaq 100 surged over 2% in one day, as capital flowed back into technology stocks. This historical context suggests that positive news from Nvidia could cause a significant reversal in dollar flows. With anticipated market movements, traders might explore options like long straddles or strangles on NVDA to capitalize on volatility, though high premiums pose a risk. A more conservative approach would involve credit spreads to bet that the post-earnings movement won’t exceed a specific range. Clearly defining risk is essential, as poor guidance could erase recent gains. Considering how broader indices are performing, the difference between the tech-focused QQQ and the small-cap IWM is important. A positive NVDA report would likely lead to bullish call options on the QQQ, anticipating a rally in big-cap companies. Conversely, disappointing results could make put options on the QQQ appealing and reverse recent strength in the IWM. In the days following the earnings report, closely monitor dollar flow. If we see significant dollar volume return to high-priced names, it would confirm a bullish outlook. However, if dollar flow remains negative even on a rising day, it could indicate ongoing distribution, suggesting that it’s wise to hedge long positions. Create your live VT Markets account and start trading now.

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