More Memory Supply 

Please click here for an enlarged chart of Micron Technology Inc (NASDAQ:MU).

Note the following:

  • This article is about the big picture, not an individual stock.  The chart of MU stock is being used to illustrate the point.  Prudent investors need to keep an eye on MU stock because lately MU stock has been leading the semiconductor mania.
  • The chart shows MU stock has moved up into zone 1 (resistance) after reporting earnings.
  • If MU breaks above zone 1 shown on the chart, $1500 is the next magnet.  The momo crowd is shooting for $2000.  As full disclosure, we are long MU from an average of $21.77.
  • Micron earnings were a blowout, exceeding the whisper numbers.  Whisper numbers had moved up going into earnings.
  • Micron earnings are reigniting AI optimism.  This morning, there is aggressive buying in the AI trade.  The bullishness is spilling into the rest of the stock market.
  • The most important point from Micron’s earnings is that Micron has struck 16 long term deals to lock in pricing and volume.  If Micron and its competitors are able to accelerate this trend, it will be a structural shift. This structural shift will smooth out historic boom bust cycles in memory.  The result may be a higher PE for Micron.
  • Markets always have crosscurrents.  In the middle of the good news of a structural shift in the memory business and uber bullishness this morning, prudent investors need to remember that more memory supply is coming online.  Micron itself had a capex of $7.1B in Q3.  Micron plans a capex of $10B in Q4 and $27B in FY27.  A vast majority of this capex is going to increase supply. 
  • So far, the momo crowd is oblivious to the potential increase in memory supply.
  • Apple Inc (NASDAQ:AAPL) is announcing significant price hikes due to higher memory prices.  It will be interesting to see if consumers easily absorb the price increases or if it results in reduced demand.
  • Also on the positive side, Qualcomm Inc (NASDAQ:QCOM) raised its FY29 non-handset revenue projection to $40B.  This is a big jump.  Historically, many have considered Qualcomm as a handset technology and chip provider.  As full disclosure, QCOM is in our portfolio, long from an average of $47.13. 
  • In a major development for the semiconductor industry, IBM Common Stock (NYSE:IBM) is unveiling the world’s first sub-1nm chip technology using transistor architecture at 0.7nm.  When commercialized this will be a major leap in semiconductor manufacturing.  As a reference, compared to IBM’s 2nm node chips, the new technology provides up to 70% better energy efficiency and 50% more performance.
  • PCE is the Fed’s favorite inflation gauge.  Inflation came inline.  Here are the details:
    • Headline PCE came at 0.4% vs. 0.4% consensus.
    • Core PCE came at 0.3% vs. 0.3% consensus.
  • The U.S. economy is 70% consumer based.  For this reason, prudent investors pay attention to personal income and personal spending.  The data shows the consumer is strong as they borrow more and deplete their savings.   Here are the details:
    • Personal spending came at 0.7% vs. 0.3% consensus.
    • Personal income came at 0.7% vs. 0.3% consensus.
  • GDP data is strong.  Here are the details:
    • Q1 GDP third estimate came at 2.1% vs. 1.6% consensus.
    • Q1 GDP Deflator third estimate came at 3.6% vs. 3.5% consensus.
  • Durable goods data is mixed.  Here are the details:
    • Durable Goods Orders came at -4.5% vs. -3.2% consensus.
    • Durable Goods Orders Ex-Transportation came at 1.3% vs. 0.5% consensus.
  • Initial jobless claims came at 215K vs. 225K consensus.
  • In our analysis, the foregoing data shows the economy is resilient with sticky underlying inflation. Retreating oil prices will help.  If the future data comes similar to the foregoing, in spite of President Trump’s wishes for lower interest rates, the Fed may have no choice but to raise interest rates. Prudent investors should note the stock market is not prepared for potential higher interest rates. 
  • Consider getting ahead of the curve and remember that in spite of this morning’s uber bullishness, quarter end rebalancing is ahead.  As we have previously shared with you, over $100B worth of equities will be sold in quarter end rebalancing.  

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 NVIDIA Corp (NASDAQ:NVDA) and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are negative in Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corp (NASDAQ:MSFT), Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), and Apple (AAPL).

In the early trade, money flows are positive 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 (USO).

Bitcoin

Bitcoin (CRYPTO:BTC) is range bound.

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.