AI DRIVEN DEMAND FOR EXTREME ULTRA LITHOGRAPHY AND CHINA DRIVE STOCK MARKET HIGHER

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By Nigam Arora & Dr. Natasha Arora

To gain an edge, this is what you need to know today.

Artificial Intelligence

Please click here for a chart of ASML stock (ASML).  ASML is on The Arora Report’s list of AI stocks to watch.  Please click here for the full list of 18 stocks to make a fortune from artificial intelligence.

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of ASML is being used to illustrate the point.
  • ASML is a Dutch company and is the largest provider of extreme ultra lithography equipment for semiconductor manufacturing.
  • Think of a chain – Nvidia (NVDA) designs AI chips, Taiwan Semiconductor (TSM) manufactures AI chips, and TSM needs equipment from ASML and AMAT to manufacture the chips.
  • The chart shows the gap up on earnings.
  • The chart shows a resistance zone is ahead.  The ZYX Change Method is close to giving a signal on ASML, but the criteria is not yet met.
  • ASML reported blowout earnings and is very bullish in its commentary.  Here are the details:
    • Earnings came at €5.21 per share vs. €4.76 per share consensus.
    • Revenues came at €7.24B vs. €6.68B consensus.
    • Revenue increased 30% year-over-year.
    • Significant growth is expected in 2025.  2024 will be a year of preparation for growth.
  • The other key player is Applied Materials (AMAT).  AMAT is in the ZYX Buy Model Portfolio.  Long time members of The Arora Report have huge gains on AMAT,   long from $16.  AMAT is trading at $171.31 as of this writing, representing a 971% gain.
  • We shared with you yesterday that China has a $279B program to boost stocks.  Today, China is taking additional steps to help stocks.
    • China is reducing the bank reserve requirement ratio by 0.5% on February 5.  The move is estimated to add $139B in liquidity.  This cut follows two cuts in 2023.
    • People’s Bank of China is also reducing ratings and adjusting policies to boost the agricultural sector and property development.
    • There are reports that additional support measures are ahead.
  • In The Arora Report analysis,  the moves by China are boosting stocks in many sectors across the globe.  Prominent among the stocks being boosted are semiconductor stocks, copper stocks, and iron stocks.   
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.
See also  DON’T IGNORE CHINA RISK IF YOU ARE CAUGHT UP IN AI FRENZY, EUPHORIA BUILDS ON COOLER CPI, $2400 GOLD

Layoffs

SAP (SAP) is the largest European software company with major presence in the U.S.  It is accelerating AI development, and as a result, laying off 8,000 people.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), Nvidia, Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).

In the early trade, money flows are positive in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

The momo crowd is *** (To see the locked content, please take a 30 day free trial) stocks in the early trade.  Smart money is *** in the early trade.

Gold

The momo crowd is *** gold in the early trade.  Smart money is *** in the early trade.

For longer-term, please see gold and silver ratings.

Oil

API crude inventories came at a draw of 6.674M barrels vs. a consensus of a draw of 3M barrels.

The momo crowd is *** oil in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) bulls bought the dip, briefly running bitcoin over $40,000.  When bitcoin went above $40,000, selling came in.

Markets

Our very, very short-term early stock market indicator is ***.  This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.

Interest rates are ticking down, and bonds are ticking up.

The dollar is weaker.

Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.

See also  WEEKLY STOCK MARKET DIGEST: CROSSCURRENTS IN THE STOCK MARKET CREATING UNCERTAINTY FOR PRUDENT INVESTORS

Gold futures are at $2035, silver futures are at $22.98, and oil futures are at $75.03.

S&P 500 futures are trading at 4919  as of this writing.  S&P 500 futures resistance levels are 5020, 5210, and 5400: support levels are 4826, 4440, and 4713.

DJIA futures are up 133 points.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding *** in cash or Treasury bills or allocated to short-term tactical trades; and short to medium-term hedges of ***, and short term hedges of ***. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

See also  AI STOCKS SHOW ASYMMETRY ON EXPECTATIONS PROVING TOO HIGH, WALL STREET PREPS FOR PRESIDENTIAL DEBATE

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of seven year duration or less.  Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

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This post was just published on ZYX Buy Change Alert.

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Picture of Nigam Arora

Nigam Arora

Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.

Picture of Dr. Natasha Arora

Dr. Natasha Arora

Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.

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