By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Artificial Intelligence Frenzy
Please click here for a chart of Advanced Micro Devices stock (AMD).
Note the following:
- Debt ceiling brinkmanship is ahead. Biden is meeting with congressional leaders today. So far the stock market is not concerned as the belief is that there will not be a default on the U. S. debt.
- In The Arora Report analysis, as we get closer to June, some anxiety will start creeping into the stock market if both sides do not come to an agreement. The most likely scenario is for both sides to come to a short term agreement and the matter drags on.
- A fortune is to be made in artificial intelligence. However, investors will need to be very careful as the AI frenzy spreads.
- The chart illustrates why investors need to be careful.
- AMD is one of the artificial intelligence stocks that The Arora Report named early on. Right now AMD is far behind NVIDIA (NVDA) and does not have any material AI revenues.
- The chart shows the AMD stock ran up going into earnings as the momo crowd bought on hope strategy.
- Earnings were worse than the consensus and significantly worse than the whisper numbers. The most concerning was AMD’s data center revenues.
- The chart shows The Arora Report gave a signal to short sell AMD stock.
- The chart shows that the stock fell as investors digested the earnings.
- The chart shows when the Arora signal to take profits on the short sale was given.
- The chart shows when the news came out that Microsoft (MSFT) was going to finance AMD’s artificial intelligence chip.
- The chart shows when Arora buy signal was given.
- The chart shows that the stock dipped close to the low end of the AMD buy zone giving a good average price for those who scaled in the buy zone.
- The news turned out to be wrong. MSFT denied that it was financing AMD’s artificial intelligence chip. Since the reason for buying AMD in the short term was gone, and AMD is too expensive to hold for the longer term at this time, an Arora signal was given to take profits and exit the position.
- The chart shows when latecomers came in and aggressively started buying AMD stock. The stock started running up because several social media gurus started hyping AMD stock on the old wrong news that MSFT was going to finance AMD’s AI chip. These gurus did not tell their followers that the news was old and MSFT had already issued a statement that the news was wrong.
- The chart shows a strong move up as investors aggressively bought AMD stock on the wrong news that was already denied.
- The foregoing is an illustration as to why investors need to be careful regarding the AI frenzy.
A New Feature
Yesterday in the Afternoon Capsule we tested a new feature giving investors a heads up of the earnings after hours that had the potential to generate signals. Two signals were given in ZYX Short on PYPL and PLTR. Both trades have been profitable. Profits have been taken on PLTR and the trade exited this morning. Partial profits have been taken on PYPL. Please provide us feedback if you would like us to do further testing on this feature. Write to subscription@thearorareport.com.
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.
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 🔒 in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bittrex, once one of the largest crypto exchanges, has filed for bankruptcy after being sued by the SEC. 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 $2036, silver futures are at $25.76, and oil futures are at $72.43.
S&P 500 futures are trading at 4136 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 98 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.
