By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Please click here for a chart of semiconductor ETF SMH.
Note the following:
- Semiconductors are often a leading indicator.
- The chart shows that semiconductors are consolidating above the support zone but below the resistance zone.
- RSI on the chart shows that semiconductor ETF SMH can go either way.
- The economic data has changed quickly, opening a path for an immaculate landing.
- An immaculate landing is a landing in which inflation comes down but the economy continues to grow at 2% or higher.
- There have been many times in the markets when totally different events coincide, pushing the stock market higher than anyone would expect.
- The potential event this time is artificial intelligence. ChatGPT from OpenAI has broken through and caught the imagination of almost everyone in the technology world.
- OpenAI is affiliated with Microsoft (MSFT). There is talk of MSFT making an additional $10B investment in OpenAI. MSFT is planning on bringing ChatGPT to its cloud offering Azure.
- MSFT will strive to rapidly bring ChatGPT to Office applications such as Word and PowerPoint.
- LinkedIn may see ChatGPT applications soon.
- MSFT may also bring ChatGPT to Bing in a challenge to Google (GOOG).
- There is a code red alert at GOOG as they see the potential challenge from ChatGPT. Google is reportedly redeploying resources to come up with an answer to ChatGPT.
- There is the potential of an AI frenzy somewhat similar to the internet frenzy from 1995 – 2000. During the late 1990’s, the stock market went up dramatically but crashed in 2000.
- It is conceivable that an artificial intelligence frenzy develops coincident with an immaculate landing, pushing S&P 500 to 6000 over the next three to four years.
- The foregoing is not the base case but an important possible scenario that investors should be aware of.
- There is a wide range of outcomes with fair probabilities. For this reason, investors need to stay nimble and pay attention to the protection band. The protection band is adjusted as probabilities change.
- For those wanting next-level, in depth information, a podcast titled “Immaculate, Soft, Or Hard Landing: S&P 500 2500 Or 6000” is in post production and should be live shortly.
Rehn and Knot, policymakers at the European Central Bank (ECB), are favoring 50 basis point hikes at the next few meetings.
Spotify (SPOT) is laying off 6% of its workforce.
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.
The momo crowd is 🔒 in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see gold and silver ratings.
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
The gambit by the whales has worked. Retail investors are buying bitcoin. Bitcoin bulls are hoping for a run to $30,000. Bitcoin is trading at $22,803 as of this writing.
Our very, very short-term early stock market indicator is 🔒, but expect the stock market to open 🔒. 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 up, and bonds are ticking down.
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 $1922, silver futures are at $23.39, and oil futures are at $82.34.
S&P 500 futures resistance levels are 4200, 4318 and 4400: support levels are 3950, 3860 and 3770.
DJIA futures are up 88 points.
Protection Bands 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 stock 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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