By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Biden’s New Step In AI War
Please click here for a chart of AMD stock (AMD).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of AMD is being used to illustrate the point.
- It is no secret that China and the U.S. are geopolitical rivals. China is determined to beat the U.S. and become the world’s number one superpower. The U.S. is determined to stay the world’s number one superpower. Artificial intelligence is one of the most important weapons in this war.
- In the AI war with China, Biden is taking another step. Biden is about to impose new restrictions on the export of artificial intelligence chips to China.
- Stocks of Chinese AI companies and Chinese megacaps such as Alibaba (BABA) are down on the news. In the U.S., Nvidia (NVDA) is down about 3.5%, and AMD is down about 3% on the news as of this writing.
- Generative AI, which is behind ChatGPT, is very compute intensive. This means increased demand for datacenter semiconductors.
- Right now, among semiconductors Nvidia is the most popular among institutional investors. AMD is the most popular among retail investors.
- The chart shows that a big gap up occurred on the AMD chart even after a massive run triggered by false Microsoft (MSFT) news. The news was that Microsoft would invest in the development of AMD’s artificial intelligence chip. Microsoft stated that the news was false. However, momo gurus kept pumping AMD stock citing the news that Microsoft would invest in AMD’s artificial intelligence chip without disclosing that the news was false.
- The gap shown on the chart occurred when Nvidia announced in its earnings report a $4B jump in revenues due to increased demand for AI. As a reference, ChatGPT was trained on 10,000 Nvidia GPUs.
- The chart shows AMD stock kept running up after the gap up.
- The chart shows an outside day. An outside day is a classic reversal signal. The chart shows that the classic reversal signal worked perfectly this time.
- The chart shows that AMD has lost about 20% from its peak even though the AI frenzy has continued. The 20% loss has occurred while the stock market represented by S&P 500 ETF SPY and Nasdaq 100 ETF QQQ has continued to go up. Also during this time, the magnificent seven, as a group, have continued to perform. The magnificent seven are Apple (AAPL), Amazon (AMZN), Alphabet (GOOG, GOOGL), Meta (META), Microsoft, Nvidia, and Tesla (TSLA).
- The magnificent seven are responsible for a vast majority of the gain in the stock market in 2023.
- The Arora Report call has been and continues to be that AI is real and a fortune is to be made in AI over the next seven years. However, it is not going to be a straight line. The foregoing shows that at times, it is going to be treacherous. Investors need to be highly disciplined and correctly follow a proven system such as the combination of ZYX Change Method and the adaptive ZYX Asset Allocation Model with inputs in ten categories.
- Also, keep in mind that there are two flaws in the current logic that gurus are using to promote artificial intelligence.
- They are talking about the revenues companies such as Microsoft and Nvidia are going to generate from artificial intelligence. There is another side to the revenues. For the companies that are buying AI, AI is a massive cost.
- For many companies, AI will be a massive disruptive force and their stocks will go down.
- Our over 30 years of experience in the markets has clearly demonstrated that investors who develop in-depth knowledge perform significantly better compared to those investors who do not develop in-depth knowledge. The best and most time efficient way to develop knowledge for AI investments is to listen to the podcasts in the Arora Ambassador Club.
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 oil inventories came at a draw of 2.408M barrels vs. a consensus of a draw of 1.467M 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 is range bound.
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 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 $1916, silver futures are at $22.71, and oil futures are at $67.86.
S&P 500 futures are trading at 4408 as of this writing. S&P 500 futures resistance levels are 4460, 4600, and 4713: support levels are 4400, 4318, and 4200.
DJIA futures are down 18 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.
