By Nigam Arora
To gain an edge, this is what you need to know today.
Challenging King Nvidia
Please click here for a chart of Advanced Micro Devices stock (AMD).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of AMD stock is being used to illustrate the point.
- The chart shows the jump up in AMD stock on the news of the deal with OpenAI.
- The chart shows AMD stock is in zone 1 (resistance).
- The chart shows the Arora buy zone. Those who acted quickly on the Arora buy signal in the premarket have a fill on AMD and the position is profitable as of this writing.
- RSI on the chart shows AMD stock is overbought. Overbought stocks are susceptible to a pullback.
- Here are the key points about the AMD and OpenAI partnership:
- The partnership includes AI data centers to run on AMD chips, not Nvidia (NVDA) chips.
- OpenAI or its cloud computing partners will purchase 6 gigawatts of AMD chips starting next year.
- The chips will be used for inference and computations required for chatbots and other AI applications to respond to users.
- The deal is expected to bring in tens of billions of dollars of revenue to AMD over the next five years.
- OpenAI is to receive warrants awarded in phases for as many as 160M shares of AMD stock at $0.01 per share. That is approximately 10% of AMD. The price of AMD stock must increase in order for the warrants to be exercised.
- The OpenAI AMD deal is a challenge to AI King Nvidia. In The Arora Report analysis, Nvidia will remain the king for training AI models, and AMD will make great inroads in inference.
- The OpenAI AMD deal is overshadowing everything else in the stock market.
- The U.S. government shutdown is prompting money to flow into gold and bitcoin. Please see the sections below.
- As an actionable item, the sum total of the foregoing is in the Arora Protection Band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the Arora Protection Band. The Arora Protection Band is one of the large number of unique edges that are available to members of The Arora Report.
Japan
Sanae Takaichi is the new leader of Japan’s ruling party, the Liberal Democratic Party (LDP). She is expected to become Japan’s first female prime minister. Takaichi is known for her ultra-conservative politics. Takaichi’s plan is to strengthen ties with the U.S. and partnerships with South Korea, the Philippines, and Australia.
The Japanese stock market jumped with the Nikkei 225 up over 4.75%.
Takaichi was a protege of the late Shinzo Abe. Abe’s policies are known as Abenomics. In The Arora Report analysis, Takaichi is likely to follow Abenomics with some changes. This is positive for Japan. Japan ETF EWJ is in the Core Model Portfolio in ZYX Allocation. The position is nicely profitable.
Magnificent Seven Money Flows
Most portfolios are now heavily concentrated in the Mag 7 stocks. For this reason, to get ahead and get an edge, investors need to dig below the surface of the Mag 7 stocks. It is equally important to rise above the noise of daily news on the Mag 7 stocks. The best way to get an edge, dig below the surface, and rise above the noise of the daily news is to pay attention to early money flows in the Mag 7 stocks on a daily basis. When there is significant news in the Mag 7 stocks that rises above the threshold of noise and impacts your entire portfolio, it is covered in the main section above.
In the early trade, money flows are positive in Amazon (AMZN), Microsoft (MSFT), and Tesla (TSLA).
In the early trade, money flows are neutral in Apple (AAPL).
In the early trade, money flows are negative in Alphabet (GOOG), Meta (META), and Nvidia (NVDA).
In the early trade, money flows are positive 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.
Note for new members: Smart money often sells into the strength generated by momo crowd buying and buys into the weakness generated by momo crowd selling. Over a long period of time, investors come out ahead by adopting smart money’s ways. The exception is in a raging bull market – for very short term trades, consider following the momo crowd and not smart money. Smart money is an important indicator but is only one of hundreds of indicators that go into determining the Arora Protection Band and signals. Please click here and here to understand how signals are generated.
Very Very Short-Term Indicator
The Arora Report’s proprietary 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.
Gold
Gold is seeing aggressive buying and is now approaching the magnet of $4000.
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 *** oil in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) hit an all time high over $125,000.
Markets
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.
S&P 500 futures are trading at 6789 as of this writing. S&P 500 futures resistance levels are 7000 and 7200 : support levels are 6780, 6500, and 6256.
DJIA futures are up 100 points.
Gold futures are at $3953, silver futures are at $48.02, and oil futures are at $61.56.
Arora Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror. The proprietary Arora Protection Band from The Arora Report is very popular. The Arora Protection Band puts all of the data, all of the indicators, all of the news, all of the crosscurrents, all of the models, and all of the analysis in an analytical framework that is easily actionable by investors.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding *** in cash, Treasury bills, short term fixed income, 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.
A protection band of 0% would be very bullish and would indicate full investment with 0% in cash. A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.
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.
