Silver Is The New AI Play – Trader Magnet Is Much Higher, Fed Week

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

Silver Is The New AI Play

Please click here for an enlarged chart of silver ETF iShares Silver Trust SLV.

Note the following:

• The chart is a monthly chart to give you the long term perspective.
• In The Arora Report analysis, silver has the potential to become an AI play.  
  • Silver is extensively used in electronics that go into AI data centers.
  • AI data centers are power hungry.  Some data centers are being built next to huge solar farms.  Silver is used in solar cells.  First Solar Inc FSLR is the leader in utility scale solar farms.  As full disclosure, First Solar is in The Arora Report’s ZYX Buy Core Model Portfolio.
• Silver also moves with gold.  We have previously shared with readers that gold has hit a new high.
• The chart shows that silver is far from a new high.
• The chart shows the resistance zone.  If the resistance zone is broken, silver can go much higher.
• The chart shows the trader magnet for silver.
• RSI on the chart shows that silver is overbought.  Overbought commodities tend to pullback.
• In The Arora Report analysis, Wall Street positioning in silver is very low.  This can lead to an explosive up move once the move starts going.  Positioning is an important Wall Street mechanic.  Investors who learn Wall Street mechanics gain important edges.  It is difficult to learn the nuances of Wall Street mechanics because Wall Street professionals keep these nuances close to the chest due to their very high value. 
• The move in silver will come down to three factors:
  • If the Fed lowers rates by 25 bps or 50 bps
  • How gold reacts to the Fed
  • Does a short squeeze start in silver?  In The Arora Report analysis, silver is prone to short squeezes.  
• The move in silver in 2021 was the result of silver becoming a meme crowd favorite and the resulting short squeeze.
• The Arora Report gold and silver ratings are used across the globe by individual investors, hedge funds, institutions, bullion dealers, and jewelers. 
• The chart shows that The Arora Report gave a back up the truck and buy silver signal when silver was in the $17 range. The Arora Report gave a sell signal on silver hours before silver peaked. 
• Not only that, right at the peak around $50, The Arora Report gave a signal to short sell signal and gave a target for silver to fall to $34 in a matter of weeks.
• As full disclosure, Silver ETF SLV is in The Arora Report’s ZYX Buy Core Model Portfolio. 
• Last week a big weekly reversal occurred in S&P 500.  Last week was one of the best weeks.  The prior week was one of the worst weeks.  Since 1957, there have been 10 such reversals when the stock market was near a high.  S&P 500 has been higher an average of 5.2% over the next three months 90% of the time.
• Apple Inc AAPL is falling today after Ming-Chi Kuo said that demand for the iPhone 16 is lower than expected.  In the past, analysis from Ming-Chi Kuo has almost always proven spot on.
• This is a Fed week.  FOMC will announce its decision at 2pm ET on Wednesday.
• In the early trade, the momo crowd is buying, but some selling is coming in tech stocks on Ming-Chi Kuo's report.

Magnificent Seven Money Flows

In the early trade, money flows are neutral in Meta Platforms Inc META, Amazon.com, Inc. AMZN, and Alphabet Inc Class C GOOG.

In the early trade, money flows are negative in AAPL, Microsoft Corp MSFT, NVIDIA Corp NVDA, and Tesla Inc TSLA.

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

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 BTC/USD is seeing light selling.

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.

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.