Semi Mania

Please click here for an enlarged chart of Broadcom Inc (NASDAQ:AVGO).

Note the following:

• This article is about the big picture, not an individual stock.  The chart of AVGO stock is being used to illustrate the point.  Broadcom is a semiconductor company that has diversified into software.  AVGO stock has run up primarily because of its custom AI chip offerings.
• The chart shows AVGO stock ran up going into earnings.  The buying was mostly from the momo crowd.  Momo gurus were predicting blowout earnings from Broadcom and the stock going to the moon after earnings.
• We previously shared with you that earnings estimates are very high and there is a fair probability of disappointments.  
• The chart shows a big drop in AVGO stock after earnings.
• This morning, the momo crowd is aggressively buying AVGO stock after the big drop.  Prudent investors should carefully watch to see if AVGO stock breaks below zone 1 (support), shown on the chart, or rebounds on momo crowd buying.
• In the early trade, most semiconductor stocks have opened significantly lower.  However, the momo crowd is aggressively buying the dip.  As a reference, Direxion Daily Semiconductor Bull 3X ETF (NYSE:SOXL) closed yesterday at $280.54.  This morning, it has traded as low as $240.11.  Prudent investors should carefully watch how SOXL behaves.
• Here are key pieces of data about Broadcom earnings, so you are can develop a good understanding of what is going on:
  • Revenue rose by 48% to $22.2B vs. $22.1B consensus.  Whisper numbers were north of $24B.
  • AI semiconductor revenue came at $10.8B vs. $10.7B consensus. Whisper numbers were north of $13B.
  • The company is projecting AI semiconductor revenue of $16B for fiscal third quarter vs. $17.2B consensus. Whisper numbers were north of $20B.
  • EBITDA guidance came at 68.0% vs. 69.1% consensus.
• Prudent investors need to remember stocks move based on the difference between real reported numbers and whisper numbers.  Whisper numbers are the numbers analysts privately share with their best clients.  These numbers are often different from the numbers the same analysts publish for public consumption.  Consensus numbers are the average of the numbers published for public consumption.
• In an unusual move, the world's smartest banker Jamie Dimon is pitching in a live discussion the SpaceX IPO to 2500 high net worth clients of JPMorgan Chase & Co (NYSE:JPM).  The event is being telecast to 90 JPMorgan locations.  Not only is such a pitch by the CEO of the largest bank unusual, it also signals reconciliation between Elon Musk and Dimon after years of disputes.
• Initial jobless claims came at 225K vs. 216K consensus. This is not of concern.
• The official jobs report will be released tomorrow at 8:30am ET.
• There is a dichotomy this morning in the stock market.  DJIA is going up, but Nasdaq is down.  The reason DJIA is going up is because oil and yields are falling.  The reason Nasdaq is going down is Broadcom earnings.
• Oil and yields are falling due to the U.S. saying that Israel and Lebanon have reaffirmed the ceasefire.  If you are keeping track, the ceasefire is not new news; it is just reaffirmation. It is important to note that despite this announcement, fighting continues in southern Lebanon.  There is also optimism on President Trump saying there is good progress in talks with Iran.  Prudent investors should note that Iran is saying there is no progress.

Risk To AI Trade From Japan

In our analysis, the bank of Japan is likely to raise interest rates this month.  This is important due to the carry trade.  In the carry trade, funds have borrowed hundreds of billions of dollars in Japan and invested in the U.S., primarily in the AI trade.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis. 

In the early trade, money flows are positive in Apple Inc (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corp (NASDAQ:MSFT).

In the early trade, money flows are neutral in Alphabet Inc Class C (NASDAQ:GOOG).

In the early trade, money flows are negative in Meta Platforms Inc (NASDAQ:META), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are negative in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ: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 (NYSE:USO).

Bitcoin

Bitcoin (CRYPTO: BTC) is seeing selling.  Bitcoin has broken below the important support level of $65,000.

What To Do Now

Consider continuing to hold good, very long term, existing positions and add tactical positions based on signals

.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.