Investor Traps

Please click here for a chart of Applied Materials Inc (NASDAQ:AMAT).

Note the following:

  • This article about the big picture, not an individual stock.  The chart of AMAT stock is being used to illustrate the point.  Applied Materials is one of the largest semiconductor manufacturing equipment manufacturers in the world and is critical to the AI revolution.
  • The chart shows AMAT stock is falling after earnings.
  • The chart shows the AMAT stock has fallen 32% from its high earlier this year.
  • Applied Materials reported earnings better than consensus but below whisper numbers. Here are the details:
    • Applied Materials reported EPS of $3.50 vs. $3.39 consensus.
    • Applied Materials reported revenue of $9.12B vs. $9B consensus.
    • Applied Materials projects Q4 EPS of $4.02 ± $0.20 vs. $3.68 consensus.
    • Applied Materials projects Q4 revenue of $10.25B ± $500M vs. $9.54B consensus.
  • The reason AMAT is falling in spite of outstanding earnings is that earnings are below whisper numbers.  Stocks move based on whisper numbers.  Whisper numbers are the numbers analysts privately share with their best clients.  Whisper numbers are often different from consensus numbers published by the same analysts for public consumption.
  • In our analysis, Applied Materials business, accomplishments, and growth prospects are better now than they were when the stock was trading 32% higher. 
  • Prudent investors closely watch retail sales data as the U.S. economy is 70% consumer based.  Retail sales are a bust.  Here is the latest retail sales data.
    • July headline retail sales came at -0.6% vs. 0.2% consensus.
    • July retail sales ex-auto came at -0.3% vs. 0.2% consensus.
  • Retail sales data will likely cause economists to revise GDP forecasts.
  • In the early trade, the momo crowd is oblivious to the retail sale bust, but prudent investors should pay attention. Here is the key question – will the stock market pay attention?  The momo crowd will likely not pay attention, so it will come down to smart money.  

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 neutral in Apple Inc (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), and Microsoft Corp (NASDAQ:MSFT).

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 seeing selling.

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.