NVIDIA AND GAMMA SQUEEZE OVERPOWER HOTTER INFLATION DATA

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By Nigam Arora & Dr. Natasha Arora

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

AI Frenzy

Please click here for a chart of Nasdaq 100 ETF (QQQ).

Note the following:

  • QQQ is above the trendline shown on the chart.
  • The chart shows that QQQ ran up in spite of hotter inflation data.  Yesterday, gamma squeeze and AI frenzy completely overpowered inflation data that was negative for the stock market.
  • Prudent investors know the market cannot ignore inflation forever.  While the stock market and the economy are not the same thing, they can not be completely divorced from one another.
  • As long as QQQ stays above the trendline shown on the chart, the rapidly increasing YOLO (you only live once) behavior in the stock market will continue.  In YOLO behavior, investors give up any notion of risk.
  • The chart shows that if QQQ starts pulling back, the major support zone is far off.
  • Oracle (ORCL) earnings indicated there is a strong demand for Nvidia (NVDA) chips.
  • NVDA stock ran up on Oracle earnings, which pulled up other AI stocks and led the market higher.
  • Quadruple witching is this Friday.  Quadruple witching is to the upside.
  • The incessant call buying by the momo crowd is leading to a gamma squeeze, putting upward pressure on the stock market.  Gamma squeeze is an important market mechanic.  Understanding gamma squeeze can give investors an edge.  The easiest way to understand gamma squeeze is to listen to the podcast in Arora Ambassador Club titled “MARKET MECHANICS: IMPACT OF DEALERS’ GAMMA POSITION CHANGE ON THE STOCK MARKET.”
  • NVDA has now totally replaced Tesla (TSLA) as the momo crowd’s favorite stock.  The momo crowd is selling TSLA and buying NVDA.
  • The next major trigger for the stock market will be the Nvidia GTC event that starts on March 18.
  • The momo crowd is caught up in the AI frenzy to such a large extent that the momo crowd has decided inflation does not matter anymore.
  • Of note is that as the stock market runs up, smart money is trimming positions.  This is common smart money behavior to trim into the strength and buy into the weakness.  In contrast, the momo crowd buys when the stock market runs up and sells when the stock market weakens and they cannot withstand their losses.   
  • Important economic data will be released tomorrow and may be market moving.
    • Producer Price Index (PPI)
    • Retail Sales
    • Initial Jobless Claims
  • 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 Microsoft (MSFT).

In the early trade, money flows are neutral in Apple (AAPL), Amazon (AMZN), and Meta (META).

In the early trade, money flows are negative in Alphabet (GOOG), NVDA, and TSLA.

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 *** 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 inventories came at a draw of 5.521M barrels vs. a consensus of a build of 0.400M barrels.  This data is very bullish for oil. 

The momo crowd is *** 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.

Interest rates are ticking up, and bonds are ticking down.

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 $2169, silver futures are at $24.58, and oil futures are at $79.22.

S&P 500 futures are trading at 5174 as of this writing.  S&P 500 futures resistance levels are 5210, 5256, and 5400 : support levels are 5020, 4918, and 4852

DJIA futures are up 38 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.

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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 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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