Market activity has decreased ahead of NVDA earnings, with total notional dropping from $13.4B to $2.7B and premarket volume decreasing by 58 percent. The number of movers also declined by 54 percent, showing a wait-and-see attitude amongst traders.

There has been a gradual reduction in expensive stocks, with down movers at $9.1B compared to $4.3B for up movers, despite up movers comprising 67 percent of traded shares. Currently, dollar flows are nearly balanced between down and up movers, but trimming of higher-priced names continues, with buy-side activity favouring lower-priced stocks.

Market Breadth And Up-Volume

Market breadth shifted from +359 to -212, reaching -6 today, indicating positioning paralysis rather than increased risk-taking. Up-volume prevails daily, comprising 82 percent on Friday, 67 percent on Monday, and 72 percent today, suggesting active buyers are targeting lower-priced stocks.

For traders, indices with large-cap weightings are slightly vulnerable due to dollar flow moving away from higher-priced stocks. Persistent up-volume leadership indicates that risk appetite persists in cheaper names. Traders should monitor dollar flow and breadth for indications of shifts, with potential sharp reactions if NVDA surprises positively.

We are seeing participation collapse as everyone waits for Nvidia’s numbers. The pre-market action shows a quiet exit from more expensive, large-cap stocks, even while buying continues in cheaper names. For derivative traders, this means implied volatility is elevated, making options pricier ahead of this binary event.

This tension is reflected in the CBOE Volatility Index (VIX), which has climbed to 17.5 in recent days, up from a low of 14 just last month. Adding to the caution, the latest CPI report for July 2025 came in slightly hotter than expected at 3.4%, keeping the Federal Reserve’s next move uncertain. This backdrop explains the hesitancy to take on significant risk in mega-caps before the NVDA catalyst.

Historical Precedents And Strategies

We saw a similar setup leading into the August 2024 earnings report, where quiet de-risking also preceded the announcement. Following that report’s strong upside surprise, the Nasdaq 100 rallied over 2% in a single session as capital flooded back into tech. This historical precedent suggests that any positive guidance from Nvidia could trigger a very sharp reversal of the recent dollar flows.

Given the expected sharp move, traders might consider strategies like long straddles or strangles on NVDA itself to play the volatility, though the high premiums are a risk. A more cautious approach could be using credit spreads to bet that the post-earnings move won’t exceed a certain range. The key is to define risk, as a miss on guidance could easily erase recent gains.

Looking at the broader indices, the divergence between the tech-heavy QQQ and the small-cap IWM is critical. A positive NVDA report would be a signal to favor call options on the QQQ, expecting a catch-up rally in mega-caps. Conversely, a disappointing report could make put options on the QQQ attractive, while also potentially reversing the recent strength in the IWM.

In the days following the report, we must watch the dollar flow metric closely. If we see heavy dollar volume return to the upside in high-priced names, it confirms the bull case. However, if dollar flow remains skewed to the downside even on a “green” day, it is a warning sign that distribution is still happening under the surface, making it prudent to hedge long positions.

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