FOMC MEETING, SAMSUNG OVERTAKES APPLE, AI DEMAND INDICATION AHEAD FROM AMD, AMAZON AND SUPER MICRO

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By Nigam Arora & Dr. Natasha Arora

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

Samsung Overtakes Apple

Please click here for a chart of 20+ year Treasury bond ETF (TLT).

Note the following:

  • The chart shows that bonds have fallen this year.
  • The chart shows that bonds are consolidating in the mini support zone.
  • Lower bonds mean higher yields.  Higher yields mean lower PE ratios.  Lower PE ratios mean lower stock prices, unless earnings rise.
  • So far, due to a strong economy because of the Fed’s second blunder and reckless spending by the government, earnings are better than expected.  45% of S&P 500 companies have reported earnings.  About 77% are above consensus.  This is helping the stock market to levitate.  We have described the Fed’s second blunder in a previous Morning Capsule.  The Fed’s second blunder has a major impact on your investments.  For next level information on the Fed’s second blunder, listen to the podcast titled “IMPACT OF THE FED’S SECOND BLUNDER ON YOUR WEALTH.”
  • Just released data shows more bad news on inflation.  Employment Cost Index came at 1.2% vs. 1.0% consensus.
  • The FOMC meeting starts today.  FOMC will announce its decision at 2pm ET tomorrow followed by Powell’s press conference at 2:30am ET.
  • The AI phone from Samsung (SSNLF) is proving popular.  Apple (AAPL) has lagged behind in AI.  Institutions continue to sell AAPL stock.   According to a just released report, Samsung has now taken over Apple as the largest provider of smart phones.
  • There are three notable earnings that investors should pay attention to:
    • Samsung has quadrupled its net profit due to demand from artificial intelligence.  Its high bandwidth memory is flying off the shelves.  Revenues for the quarter rose 13%.
    • Pharmaceutical giant Eli Lilly (LLY) reported earnings better than the consensus and whisper numbers.  Lilly is also raising its FY24 EPS projection to $13.50 – $14.00 from $12.20 – $12.70. Lilly’s performance is due to strong sales of weight loss drugs Mounjaro and Zepbound.  LLY stock is up about 6% as of this writing in the premarket.  LLY stock is in the ZYX Buy Model Portfolio.  Members of The Arora Report now have a gain of 145% on LLY stock.
    • NXP Semiconductor (NXPI), a leader in automotive semiconductors, reported earnings better than the consensus and whisper numbers.  NXPI is in  the ZYX Buy Model Portfolio.  NXPI is trading up over 4%  as of this writing in the premarket. Members of The Arora Report now have a gain of 179% on NXPI stock.
  • There will be another indication of demand for artificial intelligence after the market close when three important companies for AI report earnings – AMD (AMD), Amazon (AMZN), and Super Micro Computer (SMCI).
  • 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.
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Europe

The Eurozone economy has avoided a recession and is resilient.  Q1 GDP came at 0.3% quarter-over-quarter vs. 0.1% consensus.

There is selling in European stocks because of the strong GDP data weighing on rate cut expectations.

Magnificent Seven Money Flows

In the early trade, money flows are positive in AMZN.

In the early trade, money flows are neutral in AAPL and Alphabet (GOOG).

In the early trade, money flows are negative in Meta (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA).

In the early trade, money flows are negative 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

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) is trading around $61,000.  $60,000 is a key psychological support level.  Whales will likely try to hold bitcoin above $60,000.  However, the momo crowd that bought bitcoin at $70,000 on hopes of bitcoin going to $100,000 after bitcoin halving is likely to panic and sell.

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.

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

The dollar is stronger.

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.

Gold futures are at $2316, silver futures are at $26.76, and oil futures are at $83.16.

S&P 500 futures are trading at 5126 as of this writing.  S&P 500 futures resistance levels are 5210, 5256, and 5400: support levels are 5020, 4918, and 4852.

DJIA futures are down 166 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.

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Traditional 60/40 Portfolio

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

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.

To take a free 30-day trial to paid services to gain access to more opportunities, please click here.

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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