Trump Reversal On Nvidia H20 Adding To Bullishness, Buying On CPI Data

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

Trump Reversal

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

Note the following:

• This article is about the big picture, not an individual stock.  The chart of NVDA stock is being used to illustrate the point.
• The chart shows that NVDA stock is gapping up on President Trump's reversal on H20 AI chip exports to China.
• The chart shows that NVDA stock is extended after the breakout.
• The chart shows that our recent buy signal on NVDA stock was given near the April lows.  NVDA core position is in The our ZYX Buy Core Model Portfolio, long from $12.55.
• Here is the sequence of events:
  • In April, the Trump administration had banned the sale of H20 AI chips to China.
  • Nvidia CEO Jensen Huang met with President Trump and was able to persuade him to allow the export of H20 chips to China.
  • President Trump's reversal is being seen in China as a gesture of goodwill from the U.S.
  • President Trump's reversal is adding to the bullishness all across the tech sector, especially in Advanced Micro Devices Inc (AMD), Intel Corp (INTC), Taiwan Semicndctr Mnufctrng Co Ltd (TSM), Broadcom Inc (AVGO), and Marvell Technology Inc (MRVL).
  • President Trump's reversal is also emboldening TACO (Trump Always Chickens Out) traders.  TACO traders see President Trump's reversal on Nvidia as another data point confirming their belief that President Trump will not follow through with what he says on trade.
• Banks have kicked off earnings season. Among important bank earnings, JPMorgan Chase & Co (JPM) earnings are better than consensus but less than whisper numbers.  As full disclosure, JPM is in our ZYX Buy Core Model Portfolio, long from $34.14. Citigroup Inc (C) reported earnings better than consensus and whisper numbers. Wells Fargo & Co (WFC) reported better than consensus but below whisper numbers.
• Consumer Price Index (CPI) came roughly inline with expectations.  Here are the details:
  • Headline CPI came at 0.3% vs. 0.3% consensus.
  • Core CPI came at 0.2% vs. 0.3% consensus.
• In our analysis, CPI data shows that progress on reducing inflation has halted.  The release of CPI data is bringing in buying on relief that the data was not worse.  This is an indication of the extreme bullishness that is prevailing in the stock market.  
• Adding to the bullishness are two statements from Treasury Secretary Scott Bessent:
• There is no need to be concerned about the China tariff deadline.
• The process for Fed Chair Powell's replacement has started.
• There has been very aggressive buying in nuclear stocks, including Nuscale Power Corp (SMR), Oklo Inc (OKLO), Nano Nuclear Energy Inc (NNE), and Cameco Corp (CCJ), after the announcement of Meta Platforms Inc META data center plans.  As full disclosure, META is in our ZYX Buy Core Model Portfolio, long from $49.92.  As full disclosure, SMR is in the portfolio that surrounds our Core Model Portfolio in ZYX Buy.
• Producer Price Index (PPI) will be released tomorrow at 8:30am ET.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Apple Inc (AAPL), Amazon.com, Inc. (AMZN), Alphabet Inc Class C (GOOG), NVDA, and Tesla Inc (TSLA), and META.

In the early trade, money flows are neutral in Microsoft Corp (MSFT).

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 is seeing selling.

Arora Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.  Our proprietary Protection Band puts all of the data, all of the indicators, all of the news, all of the crosscurrents, all of the models, and all of the analysis in an analytical framework that is easily actionable by investors.

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.

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.