To gain an edge, this is what you need to know today.
Stargate Memory Deal
Please click here for an enlarged chart of Micron Technology Inc (NASDAQ:MU).
Note the following:
This article is about the big picture, not an individual stock. The chart of MU stock is being used to illustrate the point.
The chart shows that MU stock initially fell in the premarket because its South Korean competitors announced a big deal with OpenAI, maker of ChatGPT. Micron was not included.
The chart shows a huge up move in MU stock when investors realized that even though Micron was not included in the deal, memory is a commodity, and as such, Micron will benefit due to supply constraints. When supply is constrained in a commodity, prices rise and so do the profits of a company like Micron that produces the commodity.
For the Stargate data centers, OpenAI has signed a massive preliminary deal with two South Korean companies Samsung Electronics Co Ltd (OTC:SSNLF) and SK Hynix (OTC:HXSCL).
In our analysis, the deal is so massive that at its peak it will consume 40% of global DRAM production. There are three main producers of high bandwidth DRAM memory. SK Hynix is the leader with about 60% market share. Samsung and Micron (MU) have about 20% market share each.
The memory deal is so massive that it triggered frenzied buying in the entire AI trade, including stocks such as NVIDIA Corp (NASDAQ:NVDA), Vertiv Holdings Co (NYSE:VRT), Dell Technologies Inc (NYSE:DELL), Super Micro Computer Inc (NASDAQ:SMCI), SanDisk Corp (NASDAQ:SNDK), Western Digital Corp (NASDAQ:WDC), and Seagate Technology Holdings PLC (NASDAQ:STX).
The scale of the memory deal is overshadowing the negative implications of the government shutdown.
The positive sentiment from the AI trade and blind money lifted the entire stock market after a lower open yesterday on the government shutdown.
South Korean stocks hit a record high. We have covered South Korea continuously for 18 years. As full disclosure, the position in Ishares Msci South Korea ETF (NYSE:EWY) is very profitable. We recently gave a signal to take partial profits in EWY, taking advantage of the strength.
The initial jobless claims data is not available due to the government shutdown.
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 Apple Inc (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).
In the early trade, money flows are negative in Microsoft Corp (NASDAQ:MSFT).
In the early trade, money flows are positive in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).
Momo Crowd And Smart Money In Stocks
Investors can gain an edge by knowing money flows in SPY and QQQ. Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil. The most popular ETF for gold is SPDR Gold Trust (GLD). The most popular ETF for silver is iShares Silver Trust (SLV). The most popular ETF for oil is United States Oil ETF (USO).
Bitcoin
Bitcoin (CRYPTO: BTC) is seeing buying.
What To Do Now
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.
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.
The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.