Stocks Jump On 100% Semiconductor Tariffs - Apple, Nvidia, AMD, And Micron Benefit

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

Paper Tiger Tariffs

Please click here for an enlarged chart of Apple Inc AAPL.

Note the following:

• This article is about the big picture, not an individual stock.  The chart of AAPL stock is being used to illustrate the point.
• The chart shows the run up in AAPL stock yesterday on the news of Apple investing an additional $100B in domestic manufacturing, bringing the total commitment to $600B.
• The chart shows the move up yesterday was on heavier volume, indicating conviction.
• The chart shows the additional jump up in the after market when President Trump indicated an exemption for Apple from the semiconductor tariffs.
• The chart shows AAPL stock has crossed into zone 1 (resistance).
• RSI on the chart shows that AAPL stock is not overbought despite the up moves.
• Prior to yesterday, there were three concerns about Apple:
  • Apple needing to pay 100% semiconductor tariffs.
  • Apple needing to pay additional 50% tariffs on iPhones as most iPhones coming to the U.S. are manufactured in India.
  • Declining iPhone sales in China.
• President Trump has imposed 100% tariffs on semiconductors.  However, the tariffs are a paper tiger.  President Trump said, "But the good news for companies like Apple is if you’re building in the United States or have committed to build, without question, committed to build in the United States, there will be no charge."  Apple, NVIDIA Corp (NVDA), Advanced Micro Devices Inc (AMD), and Micron Technology Inc (MU) are among the stocks that are benefiting.
• Intel Corp (INTC) was expected to benefit, but INTC stock is falling on President Trump's demand that Intel's CEO resigns.  The reason is that in the past, Intel's CEO made investments in China. As full disclosure, a signal was given this morning for Intel (INTC) in our ZYX Buy.
• Yesterday, we shared with readers:

In a potential long term strategic blunder, President Trump appears to be pushing India away from the U.S. and close to China.

• President Trump has imposed an additional 50% tariff on India for importing oil from Russia.  However, President Trump is not threatening similar tariffs on China even though China imports more Russian oil than India.
• Indian Prime Minister Modi has decided to stand up to President Trump even in the face of 50% tariffs.  India is the third country to decide to stand up to President Trump – China was the first.  However, with China, President Trump chickened out when China turned the tables due to its stranglehold on rare earth minerals.
• Now, India, the world's largest democracy, and Brazil, the world's fourth largest democracy, are willing to stand up to President Trump even at a significant cost.
• Yesterday, the Treasury auction was soft.  Here are the details:
  • $42B 10-year Treasury note auction
  • High yield: 4.255% (4.304%)
  • Bid-to-cover: 2.35 (2.57)
  • Indirect bid: 64.2% (69.7%)
  • Direct bid: 19.6% (17.9%)
• The stock market was beginning to pullback on the soft auction when the news broke about Russia leading to renewed buying.
• President Trump and Russian President Putin are set to meet in the coming days.  This is bringing in buying on hope of an end to the Ukraine-Russia war.
• Initial jobless claims came at 226K vs. 220K consensus.
• Wall Street is drooling at the likely Trump executive order to allow private assets in 401K plans.  President Trump's order will be a big bonanza for Wall Street.  The reverse Robinhood trade continues to work well.  In our analysis, the reverse Robinhood trade is likely to pick up more steam.  In the short term, this is great for investors but not good in the long term as lower income families are increasingly paying a steeper price to make the rich richer. 
• In our analysis, a vast majority of buying that ran up the stock market yesterday and in the premarket today is coming from retail investors.  Institutional investors have turned cautious.  
• Of special interest this morning is a big drop in Eli Lilly And Co (LLY) as disappointing obesity pill data overshadows excellent earnings.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Apple (AAPL), Alphabet Inc Class C (GOOG), Meta Platforms Inc (META), Microsoft Corp (MSFT), and NVIDIA Corp (NVDA).

In the early trade, money flows are neutral in Tesla Inc (TSLA).

In the early trade, money flows are negative in Amazon.com, Inc. (AMZN).

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).

Gold

Prudent investors should note that gold should have seen selling on the news of talks with Russia.  Instead, gold is seeing buying.  The buying is mostly from the momo crowd buying on momentum and being oblivious to the Russia news.  

Bitcoin

Bitcoin is range bound.

What To Do Now

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.

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.