By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Dominating Artificial Intelligence
Please click here for a chart of Microsoft stock (MSFT).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of MSFT stock is being used to illustrate the point. There are two dominant forces driving the stock market this year: market mechanics and artificial intelligence. Microsoft is the leader in artificial intelligence software and services.
- The chart shows MSFT stock fell on Friday. The fall in MSFT was due to the ouster of Sam Altman, the CEO of OpenAI.
- OpenAI is the developer of ChatGPT.
- Microsoft is the biggest investor in OpenAI. Microsoft’s AI initiatives are centered around ChatGPT.
- Altman was fired at OpenAI after he lost the board’s confidence. Apparently, there was a culture clash at OpenAI. OpenAI is a not-for-profit organization with a for-profit arm. The clash occurred between those who want to slow and be more deliberate about AI development for public good and those who want to rapidly make money from AI.
- OpenAI has hired Emmett Shear as its new interim CEO. Shear was co-founder and ex-CEO of video game streaming service Twitch. Twitch is now owned by Amazon (AMZN). Shear has been in favor of slowing AI development.
- Microsoft tried to get Altman reinstated as CEO of OpenAI but failed. Now, Microsoft has hired Altman. Microsoft has also hired former OpenAI President Greg Brockman.
- In The Arora Report analysis, Microsoft did not appear to have much of a choice. Altman and Brockman could have joined a competitor such as Alphabet (GOOG, GOOGL). On the surface, it seems to be a good move by Microsoft on its quest to dominate artificial intelligence.
- The chart shows that MSFT stock has moved up on Microsoft hiring Altman and Brockman. This is not good news for Alphabet and Amazon. For those who want to take their investing in artificial intelligence to the next level, there are several podcasts on artificial intelligence in Arora Ambassador Club.
- Last week, Microsoft announced two new semiconductor artificial intelligence chips.
- Before his firing, Altman was reportedly trying to raise billions of dollars from Middle Eastern investors to start a semiconductor company to compete with Nvidia (NVDA).
- Nvidia will report earnings after the close tomorrow. These earnings will be closely watched and may determine the next move in the entire stock market.
- A fortune is to be made in artificial intelligence over the next seven years. It is not going to be a straight line. At times, it will be treacherous. You will need expert guidance. There is no better resource than The Arora Report. Please click here to see our carefully selected list of 18 artificial intelligence stocks to watch.
- 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.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Nvidia, Microsoft, Meta (META), Tesla (TSLA), and Apple (AAPL).
In the early trade, money flows are negative in Alphabet and Amazon.
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 *** gold in the early trade. Smart money is *** in the early trade.
For longer-term, please see gold and silver ratings.
Oil
There is speculation that OPEC+ will cut oil production.
The momo crowd is *** oil in the early trade. Smart money is *** oil 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.
Gold futures are at $1974, silver futures are at $23.48, and oil futures are at $77.74.
S&P 500 futures are trading at 4525 as of this writing. S&P 500 futures resistance levels are 4600, 4713 and 4770: support levels are 4460, 4400, and 4318.
DJIA futures are down 15 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.
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 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 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.
