By Nigam Arora
To gain an edge, this is what you need to know today.
Semiconductor Mania Grows
Please click here for a chart of leveraged semiconductor ETF (SOXL).
Note the following:
- The chart shows a 312% gain as of this writing in the premarket in leveraged semiconductor ETF SOXL since the March 30 low.
- The gap up shown this morning on the chart is driven by Advanced Micro Devices (AMD) earnings. AMD earnings were below whisper numbers. Initially, AMD stock dropped after the earnings release, but the dip was aggressively bought as semiconductor mania is in full swing – any semiconductor company that has any news, even bad news, is seeing aggressive buying. AMD’s conference call was extraordinarily bullish. It is no longer only GPUs for AI. CPU demand is seeing an extraordinary rise. Pay attention to this statement from AMD’s CEO Lisa Su, “We now expect the server CPU TAM to grow at greater than 35% annually, reaching over $120 billion by 2030.” The statement from Su is also driving Intel (INTC) and Arm (ARM) stocks higher.
- AMD stock is in ZYX Buy in the portfolio that surrounds the Core Model Portfolio. AMD is long from an average of $205.52. It is trading at $416.96 as of this writing in the premarket, representing a gain of 103%.
- Memory and disk drive stocks Micron (MU), Sandisk (SNDK), Western Digital (WDC), and Seagate Technology (STX) are seeing extremely aggressive buying. MU stock is in ZYX Buy in the portfolio that surrounds the Core Model Portfolio. MU is long from an average of $21.77. It is trading at $670.47 as of this writing in the premarket, representing a gain of 2980%.
- Semiconductor mania is now in full swing and has reached pre-2000 crash level by several measures, including fundamental, technical, and quantitative. The semiconductor index now has a PE of 37. Does this mean semiconductors are going to crash again? In The Arora Report analysis, a major pullback can happen anytime, but the probability of a 2000-style major crash is low due to AI demand.
- The Arora Report portfolios are very heavy in semiconductors. Semiconductor ETF SMH in the ZYX Allocation Model Portfolio has a gain of 6699% as of this writing in the premarket.
- The plan is to start trade around positions on any major dip in semiconductors. Trade around positions are a billionaire and hedge fund technique used to dramatically increase returns and reduce risk. Please see Trade Management Guidelines for more.
- RSI on the chart shows semiconductors are overbought but have more room to run.
- As a member of The Arora Report, you were already ahead of the curve. Starting in 2022, The Arora Report high conviction call has been a fortune is to be made in AI all the way to 2030. Now, you need to get ahead in semiconductors – the mistake investors are making is assuming that the present level of demand is going to continue for a very long time. In The Arora Report analysis, the demand will start tapering off in 2028. Sometime before then, it will be important to take more profits and hedge long semiconductor positions. There will be an extraordinary opportunity to make a fortune by short selling semiconductors. Just like an athlete trains ahead of a big event, investors need to consider developing significant short selling expertise ahead of the upcoming major opportunity. In short selling, it takes time to learn, and once you learn, you need to stay in practice. The best way to learn is to read the signals in ZYX Short. If you are not experienced in short selling and are just starting a ZYX Short membership, consider not trading any signals for a long time but use the signals to learn.
- The U.S. is advancing a proposal for a one page memorandum of understanding with Iran that will open the Strait of Hormuz. This proposal is generating significant optimism. As a result, there is aggressive buying in stocks and bonds and aggressive selling in oil. Aggressive buying in bonds is bringing yields lower. Yesterday, we shared with you the chart of 20+ year Treasury Bond ETF (TLT), showing long bonds were in the danger zone. The U.S. proposal is causing a rally in TLT.
- The U.S. Treasury is offering $125B of Treasury securities to refund $83.3B of privately held Treasury notes maturing on May 15. In The Arora Report analysis, this offering is inline with expectations and should not have any impact on the markets even though $125B is a large amount
- ADP is the largest private payroll processor in the country. ADP uses its data to provide a glimpse of the official jobs report that will be released on Friday at 8:30am ET. The just released ADP data came stronger than expected. ADP Employment Change came at 109K vs. 79K consensus.
- In important earnings, Disney (DIS), Uber (UBER), and Novo Nordisk (NVO) are reporting earnings better than whisper numbers.
- 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.
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), Alphabet (GOOG), Nvidia (NVDA), and Tesla (TSLA).
In the early trade, money flows are neutral in Meta (META).
In the early trade, money flows are negative in Apple (AAPL) and Microsoft (MSFT).
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
The momo crowd is *** gold in the early trade. This is reflected in gold ETF (GLD), silver ETF (SLV), gold miner ETF (GDX), and silver miner ETF (SIL). 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 8.1M barrels vs. consensus of a draw of 2.8M barrels.
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 buying.
Markets
Interest rates are ticking down, and bonds are ticking up.
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.
S&P 500 futures are trading at 7342 as of this writing. S&P 500 futures resistance levels are 7500 and 7700 : support levels are 7200, 7000, and 6780.
DJIA futures are up 441 points.
Gold futures are at $4695, silver futures are at $77.09, and oil futures are at $94.41.
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.
