FED MINUTES AHEAD, CHINA TELLS FUNDS TO NOT SELL STOCKS, INTEL DEAL SCRAPPED BECAUSE OF CHINA

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By Nigam Arora & Dr. Natasha Arora

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

Fed Minutes

Please click here for a chart of semiconductor ETF SMH.

Note the following:

  • Semiconductors are the leading sector and prime beneficiaries of the artificial intelligence frenzy.
  • The chart shows when Nvidia (NVDA) earnings were reported.
  • The chart shows that semiconductors took off when Nvidia guided $11B of revenue vs. $7B consensus.
  • The chart shows a downward sloping trendline as part of consolidation after a big run up in semiconductors.
  • The chart shows that semiconductors touched the top band of the support zone before it bounced.
  • Semiconductor ETF SMH is in both Model Portfolios in ZYX Allocation Alert.
  • Semiconductors are the ‘picks and shovels’ plays to generate profit from artificial intelligence.  At the present time, semiconductor picks and shovels plays are the best stocks to invest in artificial intelligence.  Those who want a deeper understanding and next-level information will find several podcasts in Arora Ambassador Club on this subject.
  • In a new development related to semiconductors,  Intel (INTC) is scrapping its deal to buy Israeli semiconductor company Tower Semiconductor (TSEM).  The buyout did not receive Chinese approval. The deal has fallen casualty to worsening U.S. China relations. 
  • The Chinese government is telling large investment funds to not be a net seller of stocks.  Yesterday we shared with you that Peoples’ Bank of China has lowered its interest rates.  We previously shared with you that the Chinese government was consulting stock market experts on ways to run up the stock market.
  • The Chinese government is trying to turn negative sentiment about its economy to positive.  One of the best ways for a government to create positive sentiment about the economy is to run up the stock market. This is also done by the U.S. government without being explicit.  The difference is that the Chinese government is very open and explicit about their attempts to run up the stock market.
  • Fed minutes will be released at 2pm ET.
  • In The Arora Report analysis, the economic data released since the Fed meeting has made these Fed minutes obsolete.  However, be alert as they may move the markets. 
  • 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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Housing

Housing starts came at 1.452M vs. 1.446M consensus.  This data is very strong.  However, building permits are a leading indicator and are reflecting the drop in home builder sentiment we shared with you yesterday in the Afternoon Capsule.  Building permits came at 1.442M vs. 1.460M consensus.

India

There is significant concern that India, China, Russia, and Brazil want to reduce  dominance of the dollar.  For the first time ever, India and U.A.E. conducted a large oil trade with India making payment for oil in rupees.  Traditionally, oil payments are made in dollars.   

Magnificent Seven Money Flows

In the early trade, money flows are positive in Nvidia (NVDA) and Microsoft (MSFT).

In the early trade, money flows are negative in Amazon (AMZN), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).

In the early trade, money flows are mixed 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 🔒 stocks in the early trade.

Gold

The momo crowd is 🔒 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 6.195M barrels vs. a consensus of a draw of 2.050M 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 (BTC.USD) 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.

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Interest rates and bonds are range bound.

The dollar is range bound.

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 $1931, silver futures are at $22.61, and oil futures are at $81.01.

S&P 500 futures are trading at 4445  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 52 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.

See also  EXTREME POSITIONING IN NVIDIA TAKES A HIT, FED MINUTES AHEAD

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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This post was just published on ZYX Buy Change Alert.

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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.

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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