AI Memory Sold Out

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

Please click here for an enlarged version of the chart of Micron Technology Inc 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. As a full disclosure, MU stock is in The Arora Report ZYX Buy Portfolio.
Micron is the largest U.S. semiconductor memory maker.
The chart shows a powerful breakout to the upside after Micron reported earnings.
The most important item from earnings for investors is that high bandwidth memory is sold out for 2024. High bandwidth memory is used in artificial intelligence applications.
In The Arora Report analysis, Micron is likely to ship $600M - $800M worth of high bandwidth memory for AI applications in 2024. As investors understand the need for high bandwidth memory, the PE of MU stock is likely to expand.
The Arora Report is raising the target on MU.
It is not just AI. The demand for memory is increasing, and prices are increasing.
Here are the important details from Micron earnings that investors should pay attention to:
- Q2 EPS came at $0.42 vs. a consensus of a loss of $0.25.
- Q2 revenue came at $5.82B vs. $5.34B consensus.
- Micron projects Q3 EPS of $0.38 - $0.52 vs. $0.20 consensus.
The Fed has turned ultra dovish, risking inflation. The Fed has shrugged off hot inflation data. Please see yesterday’s Afternoon Capsule for details.
The Fed turning ultra dovish is an important subject that all investors should deeply understand for their own financial well being. The easiest way to understand is with the analogy of a car. The U.S. government is pushing the accelerator pedal to the floor with reckless spending on the fiscal side. The Fed has been applying the breaks. Now, the Fed has lifted its foot off of the breaks.
Sentiment is extremely positive. Keep in mind that when sentiment is extremely positive, it is a contrary indicator.
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.

Apple In Trouble

Apple Inc AAPL is in trouble with the U.S. government for violation of antitrust laws. The Department of Justice is getting ready to sue Apple.

Jobless Claims

Jobless claims came at 219 vs. 216K consensus.

Jobless claims are a leading indicator and carry heavy weight in our adaptive ZYX Asset Allocation Model with inputs in ten categories. In plain English, adaptiveness means that the model changes itself with market conditions. Please click here to see how this is achieved. One of the reasons behind The Arora Report’s unrivaled performance in both bull and bear markets is the adaptiveness of the model. Most models on Wall Street are static. They work for a while and then stop working when market conditions change.

Switzerland

The Swiss franc is one of the top ten most traded currencies. In a surprise move, the Swiss National Bank cut its interest rate by 25 basis points to 1.5%. SNB has gotten ahead of the Fed and European Central Bank (ECB) in cutting rates.

U.K.

The Bank of England (BOE) has decided to keep its rates at 5.25%. The hawks at the BOE are no longer advocating for interest rate hikes.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon.com, Inc. AMZN, Alphabet Inc Class C GOOG, Meta Platforms Inc META, Microsoft Corp MSFT, NVIDIA Corp NVDA, and Tesla Inc TSLA.

In the early trade, money flows are negative in AAPL.

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust Series 1 QQQ.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying stocks in the early trade. Smart money is inactive in the early trade.

Gold

Gold is trading above $2200 for the first time ever. Money is rushing into gold as investors try to protect themselves from the Fed apparently losing its resolve to fight inflation.

The momo crowd is aggressively buying gold in the early trade. Smart money is buying gold in the early trade.

For longer-term, please see gold and silver ratings.

The most popular ETF for gold is SPDR Gold Trust GLD. The most popular ETF for silver is iShares Silver Trust SLV.

Oil

The momo crowd is selling 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 USO.

Bitcoin

Bitcoin BTC/USD is being bought on the change in Fed policy.

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 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.

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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