STOCKS JUMP ON 100% SEMICONDUCTOR TARIFFS – APPLE, NVIDIA, AMD, AND MICRON BENEFIT, BUYING ON TALKS WITH RUSSIA

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By Nigam Arora & Dr. Natasha Arora

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

Paper Tiger Tariffs

Please click here for a chart of Apple stock (AAPL).

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of AAPL stock is being used to illustrate the point.
  • The chart shows the run up in AAPL stock yesterday on the news of Apple investing an additional $100B in domestic manufacturing, bringing the total commitment to $600B.
  • The chart shows the move up yesterday was on heavier volume, indicating conviction.
  • The chart shows the additional jump up in the after market when President Trump indicated an exemption for Apple from the semiconductor tariffs.
  • The chart shows AAPL stock has crossed into zone 1 (resistance).
  • RSI on the chart shows that AAPL stock is not overbought despite the up moves.
  • Prior to yesterday, there were three concerns about Apple:
    • Apple needing to pay 100% semiconductor tariffs.
    • Apple needing to pay additional 50% tariffs on iPhones as most iPhones coming to the U.S. are manufactured in India.
    • Declining iPhone sales in China.
  • President Trump has imposed 100% tariffs on semiconductors.  However, the tariffs are a paper tiger.  President Trump said, “But the good news for companies like Apple is if you’re building in the United States or have committed to build, without question, committed to build in the United States, there will be no charge.”  Apple, Nvidia (NVDA), Advanced Micro Devices (AMD), and Micron (MU) are among the stocks that are benefiting.
  • Intel (INTC) was expected to benefit, but INTC stock is falling on President Trump’s demand that Intel’s CEO resigns.  The reason is that in the past, Intel’s CEO made investments in China.
  • Yesterday, we shared with you:

In a potential long term strategic blunder, President Trump appears to be pushing India away from the U.S. and close to China.

  • President Trump has imposed an additional 50% tariff on India for importing oil from Russia.  However, President Trump is not threatening similar tariffs on China even though China imports more Russian oil than India.
  • Indian Prime Minister Modi has decided to stand up to President Trump even in the face of 50% tariffs.  India is the third country to decide to stand up to President Trump – China was the first.  However, with China, President Trump chickened out when China turned the tables due to its stranglehold on rare earth minerals.
  • Now, India, the world’s largest democracy, and Brazil, the world’s fourth largest democracy, are willing to stand up to President Trump even at a significant cost.
  • Yesterday, the Treasury auction was soft.  Here are the details:
    • $42B 10-year Treasury note auction
    • High yield: 4.255% (4.304%)
    • Bid-to-cover: 2.35 (2.57)
    • Indirect bid: 64.2% (69.7%)
    • Direct bid: 19.6% (17.9%)
  • The stock market was beginning to pullback on the soft auction when the news broke about Russia leading to renewed buying.
  • President Trump and Russian President Putin are set to meet in the coming days.  This is bringing in buying on hope of an end to the Ukraine-Russia war.
  • Initial jobless claims came at 226K vs. 220K consensus.
  • Wall Street is drooling at the likely Trump executive order to allow private assets in 401K plans.  President Trump’s order will be a big bonanza for Wall Street.  The reverse Robinhood trade continues to work well.  In The Arora Report analysis, the reverse Robinhood trade is likely to pick up more steam.  In the short term, this is great for investors but not good in the long term as lower income families are increasingly paying a steeper price to make the rich richer.    
  • In The Arora Report analysis, a vast majority of buying that ran up the stock market yesterday and in the premarket today is coming from retail investors.  Institutional investors have turned cautious.  
  • Of special interest this morning is a big drop in Eli Lilly stock (LLY) as disappointing obesity pill data overshadows excellent earnings.
  • 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
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Magnificent Seven Money Flows

In the early trade, money flows are positive in Apple (AAPL), Alphabet (GOOG), Microsoft (MSFT), Meta (META), and Nvidia (NVDA).

In the early trade, money flows are neutral in Tesla (TSLA).

In the early trade, money flows are negative in Amazon (AMZN).

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

Prudent investors should note that gold should have seen selling on the news of talks with Russia.  Instead, gold is seeing buying.  The buying is mostly from the momo crowd buying on momentum and being oblivious to the Russia news.  

See also  NVIDIA’S ROAD TO $8T MARKET VALUATION AND TWO BUYOUT TARGETS

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) is range bound.

Markets

Interest rates and bonds are range bound.

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 6410 as of this writing.  S&P 500 futures resistance levels are 6500 and 6700: support levels are 6256, 6131, and 6017.

DJIA futures are up 250 points.

Gold futures are at $3456, silver futures are at $38.56, and oil futures are at $64.52.

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.

See also  TECH STOCKS TRACE A NEGATIVE PATTERN, FIGMAZATION OF MOMO CROWD, TRUMP WEAPONIZES TARIFFS, JOBS SURPRISE

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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Picture of 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.

Picture of 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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