INTEL EARNINGS COOL AI FRENZY, NEW DATA SHOWS EXCESSIVE CONSUMER SPENDING CONTINUES

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By Nigam Arora & Dr. Natasha Arora

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

AI Frenzy Cools

Please click here for a chart of Intel stock (INTC).

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of INTC is being used to illustrate the point.
  • The chart shows the run up in INTC stock on AI excitement.
  • The chart shows INTC stock made a double top.  This is a bearish reversal pattern.
  • The chart shows the gap down on earnings.
  • Intel earnings were slightly better than expected and guidance was worse than expected.  Here are the details:
    • Intel reported Q4 revenue of $15.4B vs. $15.16B consensus.
    • Intel is projecting Q1 revenue of $12.2B – $13.2B vs. $14.16B consensus.  In The Arora Report analysis, this is a huge miss that is shaking up the stock market.
    • Intel is projecting year-over-year growth each quarter of 2024.
    • Intel’s mission is to “bring AI everywhere.”
  • In The Arora Report, analysis, the previous AI excitement is not yet materializing at Intel.  It will take more time for Intel to see an increase in revenue due to AI.  Super Micro Computer (SMCI), a maker of computers for AI, previously reported great earnings.  AMD earnings are ahead.  It is yet to be seen if other companies can meet the high expectations.  
  • For the time being, Intel earnings have at least temporarily cooled the AI frenzy.
  • The new data shows the consumer continues to spend excessively.
    • Personal income came at 0.3% vs. 0.3% consensus.
    • Personal spending came at 0.7% vs. 0.4% consensus.
  • The Fed’s favorite inflation gauge, PCE, came in as expected.
    • Headline PCE came at 0.2% vs. 0.2%.
    • Core PCE came at 0.2% vs. 0.2%.
  • In The Arora Report analysis, consumer liquidity, especially at the low end, is declining.  It is only a matter of time before excessive consumer spending stops.  However, this is an election year, and the Biden administration is likely to do everything it can with government spending to prop up the consumer prior to the election.  
  • 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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Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN) and Tesla (TSLA).

In the early trade, money flows are neutral in Alphabet (GOOG) and Apple (AAPL).

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

In the early trade, money flows are neutral in S&P 500 ETF (SPY) and negative in 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 *** in the early trade.

Gold

The momo crowd is *** in 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 *** oil in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) is seeing aggressive buying, causing it to run over $41,000.

Markets

Our very, very short-term early stock market indicator is ***.  Keep in mind today is a Friday, and short squeezes tend to occur on Fridays.  If a short squeeze occurs, it can squeeze the market to the upside.  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 and bonds are range bound.

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.

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Gold futures are at $2024, silver futures are at $22.92, and oil futures are at $76.67.

S&P 500 futures are trading at 4926 as of this writing.  S&P 500 futures resistance levels are 5020, 5210, and 5400: support levels are 4852, 4826, and 4770.

DJIA futures are down 55 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.

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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 seven 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

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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