Nvidia To Extends Its AI Dominance – Momo Turns Nvidia Into A Casino - Sell The News Reaction

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

Extending AI Dominance

Please click here for an enlarged version of the chart of NVIDIA Corp NVDA.

Note the following:

• This article is about the big picture, not an individual stock. The chart of NVDA is being used to illustrate the point. As a full disclosure, NVDA stock is in The Arora Report ZYX Buy Core Model Portfolio.
• The chart shows the Arora signal to hedge NVDA stock near the high prior to the big drop shown by the outside day on the chart. 
• The signal to hedge NVDA stock was given ahead of the much anticipated Nvidia GTC. The momo crowd aggressively bought ahead of GTC. The chart shows that the Arora call to hedge, so far, has been as perfect of a signal as it gets in real life. So far, there has been a sell the news reaction to the Nvidia conference.
• We had previously shared with you that Nvidia has become the favorite of the momo crowd, replacing Tesla Inc TSLA for aggressively buying call options. Yesterday, the momo crowd turned NVDA stock into a casino. The momo crowd was buying stock options betting that NVDA stock would double by the end of the week – now think about it, doubling in NVDA would mean adding $2T of market value in one week. Even a simple analysis would have shown that NVDA stock doubling in a week was impossible, but do not tell that to the momo crowd.  The momo crowd was wagering its hard earned money on the impossible that NVDA stock would double this week.  The YOLO (you only live once) element has turned NVDA stock into a casino.
• The chart shows that NVDA stock has broken the trendline in the early trade. However, it is still early. NVDA stock can recover from here. If NVDA stock does not recover and decisively breaks the trendline, expect more selling to come in.
• ‘Incredible’ is the only word that can describe Nvidia CEO Jensen Huang’s keynote speech. Nvidia is clearly on a path to extend its AI dominance.
  • It is still early in the AI race.
  • Nvidia announced that Blackwell will be the successor to Hopper. Hopper is the present generation AI chip.
  • Blackwell performs significantly better in both inference and training compared to Hopper.
  • Blackwell enables generative AI on trillion parameter large language models.
  • There is a new 800G backend switch on both Ethernet and InfiniBand.
  • Nvidia is strategically moving to capture more of the value chain for AI.
• It is very important for investors who are serious about capturing profits from AI over the next several years to develop a deeper understanding of AI and how to invest in AI.
• FOMC meeting starts today.
• 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.

Housing

Housing continues to be strong. Housing starts came at 1.521M vs. 1.435M consensus.

Building permits came at 1.518M vs. 1.485M consensus.

Japan

Bank of Japan (BoJ) raised interest rates for the first time in 17 years, exiting negative rates. Japan was the last country to have a negative interest rate. BoJ’s dovish commentary indicates that Japan is not about to enter a tightening cycle like the U.S. and Europe.

We have been sharing with you that what the BoJ does will have a major impact on the U.S. stock and bond markets.  In the long term, this is negative for the U.S. stock market. Money was borrowed in Japan at negative interest rates and then invested in the U.S. markets and elsewhere.  With interest rates in Japan now in the positive, less money will flow from Japan into the U.S. markets.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Apple Inc AAPL and Alphabet Inc Class C GOOG.

In the early trade, money flows are negative in Amazon.com, Inc. AMZN, Meta Platforms Inc META, Microsoft Corp MSFT, Nvidia (NVDA), and Tesla (TSLA).

In the early trade, money flows are negative 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 buying stocks in the early trade. Smart money is selling stocks in the early trade.

Gold

The momo crowd is buying 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 GLD. The most popular ETF for silver is iShares Silver Trust 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 USO.

Bitcoin

Bitcoin BTC/USD is dropping as bitcoin whales take profit and whale memes follow the whales in taking profits.

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.