To gain an edge, this is what you need to know today.
Challenging King Nvidia
Please click here for an enlarged chart of Advanced Micro Devices, Inc. (NASDAQ:AMD).
Note the following:
- This article is about the big picture, not an individual stock. The chart of AMD stock is being used to illustrate the point.
- The chart shows the jump up in AMD stock on the news of the deal with OpenAI.
- The chart shows AMD stock is in zone 1 (resistance).
- The chart shows our buy zone.
- RSI on the chart shows AMD stock is overbought. Overbought stocks are susceptible to a pullback.
- Here are the key points about the AMD and OpenAI partnership:
- The partnership includes AI data centers to run on AMD chips, not NVIDIA Corp (NASDAQ:NVDA) chips.
- OpenAI or its cloud computing partners will purchase 6 gigawatts of AMD chips starting next year.
- The chips will be used for inference and computations required for chatbots and other AI applications to respond to users.
- The deal is expected to bring in tens of billions of dollars of revenue to AMD over the next five years.
- OpenAI is to receive warrants awarded in phases for as many as 160M shares of AMD stock at $0.01 per share. That is approximately 10% of AMD. The price of AMD stock must increase in order for the warrants to be exercised.
- The OpenAI AMD deal is a challenge to AI King Nvidia. In our analysis, Nvidia will remain the king for training AI models, and AMD will make great inroads in inference.
- The OpenAI AMD deal is overshadowing everything else in the stock market.
- The U.S. government shutdown is prompting money to flow into gold and bitcoin. Please see the sections below.
Japan
Sanae Takaichi is the new leader of Japan's ruling party, the Liberal Democratic Party (LDP). She is expected to become Japan's first female prime minister. Takaichi is known for her ultra-conservative politics. Takaichi's plan is to strengthen ties with the U.S. and partnerships with South Korea, the Philippines, and Australia.
The Japanese stock market jumped with the Nikkei 225 up over 4.75%.
Takaichi was a protege of the late Shinzo Abe. Abe's policies are known as Abenomics. In our analysis, Takaichi is likely to follow Abenomics with some changes. This is positive for Japan. As full disclosure, iShares MSCI Japan ETF (NYSE:EWJ) is in our Portfolio.
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.com, Inc. (NASDAQ:AMZN), Microsoft Corp (NASDAQ:MSFT), and Tesla Inc (NASDAQ:TSLA).
In the early trade, money flows are neutral in Apple Inc (NASDAQ:AAPL).
In the early trade, money flows are negative in Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), and NVIDIA Corp (NVDA).
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).
Gold
Gold is seeing aggressive buying and is now approaching the magnet of $4000.
Bitcoin
Bitcoin (CRYPTO: BTC) hit an all time high over $125,000.
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.
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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
