By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
New AI Supercomputer
Please click here for a chart of Nvidia stock (NVDA).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of Nvidia stock is being used to illustrate the point.
- The introduction of a new AI supercomputer over the weekend is driving the stock market higher in the early trade.
- As investors, you are already wondering which company introduced this new AI supercomputer. You probably guessed it right – right now all roads lead to Nvidia. The new supercomputer is called NVIDIA DGX. It is powered by NVIDIA GH200 Grace Hopper Superchips and NVIDIA NVLink Switch System. NVIDIA NVLink Switch System is a new interconnect that allows all GPUs to work together as one.
- Microsoft (MSFT) and Meta (META) are likely to be the first to gain access to the new supercomputer.
- The chart shows that Nvidia stock is making a new higher high after the massive gap on earnings.
- The chart shows that RSI is now at 91. This indicates a very overbought condition. When a stock is this overbought, it is vulnerable to a pullback on the slightest bad news.
- Right now, Nvidia stock is driving all AI stocks higher. In turn, AI stocks are driving the entire stock market higher.
- If Nvidia stock reverses, all AI stocks may reverse, and in turn, the stock market may reverse.
- We are on the record stating that AI is real and a fortune is to be made in AI over the next seven years. Having said that, there is more to the economy and the stock market other than AI. Right now, AI is trumping everything else. Prudent investors will be carefully watching to see how long this trend lasts.
- The fly in the ointment is that Nvidia chips are being manufactured by TSM. TSM does not have enough manufacturing capacity to satisfy the demand. Right now, there is no other manufacturer capable of stepping in quickly.
- As an indication of the demand, back orders of systems featuring graphic chips are at the highest level at Super Micro Computer (SMCI).
- To help you get a deeper understanding of investing in AI, a new podcast on an important aspect of investing in AI will be live shortly in Arora Ambassador Club.
Taiwan
As investors are excited about AI and buying TSM and NVDA stocks, investors need to remember that TSM is located in Taiwan. Clearly, China wants to capture Taiwan and gain the prize – the prize is TSM. Capturing TSM is the biggest step China can take to beat the U.S. and become a superpower.
Important news that the media is not highlighting is that there appears to be near panic in defense circles that China can easily cut off internet and phone service to Taiwan, isolating Taiwan from the rest of the world. Internet service to Taiwan comes from undersea cables. These cables can be easily cut. Taiwan is embarking on an accelerated program to deploy 700 satellite receivers to provide an alternative to undersea cables.
Debt Ceiling
Biden and McCarthy have reached a debt ceiling deal. The next step is passage by Congress. You will hear a lot of noise from both the left and the right, but ultimately the center is expected to hold and pass the deal.
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 🔒 gold 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
Until last week, bitcoin gurus were predicting that there would be a default on the national debt, and that was the reason to buy bitcoin. Now that a debt deal has been reached and bitcoin gurus have been proven wrong, the same gurus are urging their followers to buy bitcoin because the debt deal is good for bitcoin. Of course, the sheep are obliging by buying bitcoin.
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.
Gold futures are at $1975, silver futures are at $23.28, and oil futures are at $70.69.
S&P 500 futures are trading at 4237 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 4 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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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.
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.
