Nvidia fell by 10%! Is it a major adjustment or a temporary one? Checking the downside potential

Reasons for selling on September 3rd:
When we take a detailed look at Nvidia's earnings and the current market environment, the selling on September 3rd can be attributed to several factors.
1) Concerns about the sustainability of NVIDIA's high growth.
2) Resurgence of concerns about a slowdown in the US economy, cautious stance ahead of employment data.
3) September selling jinx.
4) Sector rotation.

1) Concerns about the sustainability of NVIDIA's high growth.
NVIDIA announced its earnings on August 28, which exceeded market expectations. However, it fell short of the most bullish estimates, leaving investors somewhat disappointed who were expecting explosive growth. The stock price fell 6.4% on the day after the earnings release. It temporarily rebounded by 1.5% on the following day. However, on September 3, the first trading day of the month, it plummeted 9.5%. The larger decrease compared to the day after the earnings release is believed to be influenced by the following factors.

2) Resurgence of concerns about a slowdown in the US economy, cautious stance ahead of employment data.
The ISM Manufacturing Purchasing Managers' Index (PMI) for August, which was announced on September 3, was 47.2, lower than the market expectation of 47.5. Following the previous month's lower-than-expected result, concerns about a slowdown in the US economy resurfaced. Just a month ago, at the beginning of August, NVIDIA shares and key indices experienced significant adjustments due to lower-than-expected ISM Manufacturing PMI. Afterward, when the employment data for July exceeded expectations, the key indices recovered. Based on the movement on September 3, it appears that investors lack confidence whether a similar development will occur this time. September is typically the weakest month of the year, and there was a cautious mood ahead of the employment data for August on September 6.

4) Sector rotation.
This adjustment is believed to be driven by the rotation from the tech stocks that have been advancing since the second half of the year, rather than NVIDIA's fundamentals and valuation (※1). With the implementation of rate cuts imminent, during this earnings season, positive surprises in the underperforming sectors are expected to be larger than in the tech stocks. As a result, reassessment buying (※2) of the underperforming sectors, which can also benefit from rate cuts, continues. For example, on September 3rd, defensive sectors such as essential goods and real estate showed resilience in the falling market segmented by industry.

Is it a significant adjustment or a temporary adjustment?
If we look at the year-to-date performance of NVIDIA shares, this year has been somewhat volatile, with many days of more than 6% decline. For example, there were downturns in mid-April, mid-June, and late July through early August.

In the short term, most of the past adjustments have been temporary in the first half of the year. On the other hand, as indicated by the orange dotted line on the graph, even if there is a return from a temporary adjustment after mid-June, it has not surpassed the previous high. There seems to be strong selling pressure on the rebound. Therefore, caution may still be needed, at least through September.

In the U.S. stock market, November has the highest growth rate of the year. There is a tendency for the uptrend to continue towards the end of the year. There is also a potential opportunity for dip buying.

From a technical perspective, the lower target level is
Considering the current market environment, supply and demand are expected to be major factors. Traders are likely to focus on Fibonacci retracement levels, with around $105 and then around $94 being the key levels to watch.