Benzinga - by The Arora Report, Benzinga Contributor.
To gain an edge, this is what you need to know today.
Hotter Inflation Please click here for a chart of Applied Materials, Inc. (NASDAQ: AMAT).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of AMAT stock is being used to illustrate the point.
- As we have been sharing with you, Applied Materials is the best “picks and shovels” play in artificial intelligence.
- Artificial intelligence needs more sophisticated chips. To manufacture more sophisticated chips, companies such as Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM) and Intel Corp (NASDAQ: INTC) are buying more sophisticated equipment to manufacture the chips. Applied Materials is a big beneficiary.
- The chart shows the big jump in AMAT stock on earnings.
- RSI on the chart shows that AMAT is overbought.
- The power of the demand for AI is reflected in the following earnings details from AMAT:
- The company reported adjusted earnings per share of $2.13 vs. $1.90 consensus.
- The company reported revenue of $6.71B vs. $6.48B consensus.
- The company is forecasting revenue for the current quarter with a midpoint of $6.5B vs. $6.34B consensus.
- The strength in AMAT is pushing tech stocks higher, especially AI stocks.
- The rise in AMAT stock shows that “picks and shovels” is a great strategy.
- Producer Price Index (PPI) came hotter than expected, just as the Consumer Price Index (CPI) did on Tuesday. Here are the details:
- Headline PPI came at 0.3% vs. 0.1% consensus.
- Core PPI came at 0.5% vs. 0.1% consensus.
- Atlanta Fed President Bostic indicated that the Fed is not in a rush to cut interest rates due the strong economy and strong labor market. Bostic also warned that “victory is not clearly at hand.”
- University of Michigan consumer confidence will be released at 10am ET. The data may be market moving.
- 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 Corp (NASDAQ: NVDA) and Tesla Inc (NASDAQ: TSLA).
In the early trade, money flows are neutral in Alphabet Inc Class C (NASDAQ: GOOG) and Microsoft Corp (NASDAQ: MSFT).
In the early trade, money flows are negative in Apple Inc (NASDAQ: AAPL), Amazon.com, Inc. (NASDAQ: AMZN), and Meta (META).
In the early trade, money flows are mixed in SPDR S&P 500 ETF Trust (ARCA:SPY) and Invesco QQQ Trust Series 1 (NASDAQ: QQQ).
Momo Crowd And Smart Money In Stocks The momo crowd is buying stocks in the early trade. Smart money is selling stocks in the early trade.
Gold The momo crowd is selling gold in the early trade. Smart money is inactive in the early trade.
For longer-term, please see gold and silver ratings.
The most popular ETF for gold is SPDR Gold Trust (ARCA:GLD). The most popular ETF for silver is iShares Silver Trust (ARCA:SLV).
Oil The momo crowd is buying oil in the early trade. Smart money is inactive in the early trade.
For longer-term, please see oil ratings.
The most popular ETF for oil is United States Oil ETF (ARCA:USO).
Bitcoin Bitcoin (CRYPTO: BTC) is range bound.
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 a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. 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.
The Arora Report is known for its accurate calls. The Arora Report correctly called the 2008 financial crash, the start of a mega bull market in 2009, the COVID crash, the post-COVID bull market, and the 2022 bear market. Please click here to sign up for a free forever Generate Wealth Newsletter.
This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.
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