By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
AI Frenzy Pauses
Please click here for a chart of Broadcom stock (AVGO)
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of Broadcom stock is being used to illustrate the point.
- AVGO is a semiconductor company with presence in custom ASIC chips and networking chips.
- The chart shows the move up on Nvidia (NVDA) earnings.
- The chart shows a second move up on Marvell (MRVL) earnings.
- The chart shows when Wall Street’s buy pump started with positive comments and/or upgrades from JPMorgan (JPM), Evercore ISI, KeyBanc, and BMO Capital among others.
- The chart shows that RSI reached almost 90, signaling a very overbought condition.
- The chart shows that the stock rocketed to a high of $921.78 on Wall Street’s pump and then abruptly pulled back to $798.81. That is a drop of $122.97. This shows how treacherous investing in AI is. Those who followed the pump by Wall Street analysts and went all in got burned.
- A fortune is to be made in artificial intelligence over the next seven years, but it is imperative that you increase your strategic and tactical knowledge of investing in AI. The easiest way to gain this knowledge is to listen to the podcasts in Arora Ambassador Club.
- AI frenzy may pick up again as Apple (AAPL) will likely discuss its AI strategy at its annual WWDC next week.
- AAPL will also unveil a mixed reality headset named Reality Pro. The headset is likely to be priced around $3000. Depending upon Apple’s presentation, a mixed reality frenzy may develop on top of the AI frenzy.
- JOLTS job openings data will be released at 10am ET. Depending upon the data, it may be market moving. The consensus is 9.4M vs. 9.59M last month.
- The Fed’s Beige Book will be released at 2pm ET.
China PMI data is weighing on the stock market in the early trade. Here are the details:
- Manufacturing PMI came at 84.8 vs. 51.4 consensus.
- Non-manufacturing PMI came at 54.5 vs. 54.9 consensus.
The new data shows that inflation is falling in Germany and France faster than expected.
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 🔒 stocks in the early trade.
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 has fallen below $70.00.
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin failed to sustain above $28,000 as bitcoin gurus’ narrative to buy bitcoin due to the debt ceiling deal was absurd at best.
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 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 $1980, silver futures are at $23.41, and oil futures are at $67.24.
S&P 500 futures are trading at 4193 as of this writing. S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.
DJIA futures are down 124 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.
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 five 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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