Opportunities For Investors Beyond AI And Nvidia – Biotech Breaks Out, New GDP Data Shows Inflation Pressure

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

Biotech Breakout

Please click here for an enlarged version of the chart of SPDR S&P Biotech ETF XBI.

Note the following:

• The chart shows biotech has broken out.
• The chart shows the move up was on high volume, indicating conviction in the move.
• The chart shows when XBI was in the Arora buy zone. This represents a 54% gain in about four months. XBI is in the ZYX Allocation Core Model Portfolio by The Arora Report.
• RSI on the chart shows that biotech is overbought.
• The breakout in biotech shows there are opportunities for investors beyond AI, NVIDIA Corp NVDA, and big tech.
• Eli Lilly And Co LLY is a prime example. LLY has gained 139% in about a year.
• In important news for AI, Apple Inc AAPL has canceled its electric vehicle project.  About 2,000 people have been working on this project. Apple seems to be recognizing that it needs to devote more resources to AI. This is good news for Tesla Inc TSLA.
• Just released GDP data shows the economy is very strong and there is inflation pressure. Here are the details:
  • Q4 GDP Second Estimate came at 3.2% vs. 3.2% consensus.
  • GDP Deflator Second Estimate came at 1.6% vs. 1.5% consensus.
• Prudent investors should keep in mind that GDP is a lagging indicator. The Arora Report system is based on leading indicators in ten categories. Please click here to see the ten categories of the ZYX Asset Allocation Model.
• The latest consumer confidence data indicates that there is a high probability of this stock market rally stalling and even pulling back. Consumer confidence came at 106.7 vs. 114.6  consensus.
• Fed speak is ahead today from Fed Presidents Raphael Bostic, Susan Collins, and John Williams. Expect Fed speakers to push back against the notion of rapid interest rate cuts.
• 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.

Magnificent Seven Money Flows

In the early trade, money flows are positive in TSLA.

In the early trade, money flows are neutral in AAPL and Microsoft Corp MSFT.

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

In the early trade, money flows are mixed 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 inactive 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

Oil is seeing buying on speculation that OPEC+ could extend production cuts through the end of the year.

API crude inventories came at a build of 8.428M barrels vs. a consensus of a build of 1.5M barrels. The API data is bearish for oil, but for the time being, traders are focused on OPEC+ speculation.

The momo crowd is aggressively 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

Yesterday we wrote:

There is no resistance for bitcoin between here and $65,000.

At that time, Bitcoin BTC/USD was trading around $56,000.

Bitcoin has rocketed passed $60,000 and is trading above $61,000 as of this writing.

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.