AI Safety Warnings

Please click here for an enlarged chart of Direxion Daily Semiconductor Bull 3X ETF (NYSE:SOXL).

Note the following:

  • Semiconductors are important because semiconductors have been the leading sector in the AI trade, and SOXL is the momo crowd’s favorite ETF.
  • The chart shows a major pullback from the June high to the July low.
  • The chart shows the July low occurred at the low band of zone 3 (support).
  • The chart shows a rally from the July low on the collapse of Situational Awareness.  Situational Awareness was a $45B fund that lost 67% in July.
  • The chart shows the rally led SOXL to the bottom band of zone 2 (resistance).
  • The chart shows that the rally failed to extend above the low band of zone 2.  Since then, SOXL pulled back to below the top band of zone 3 in late August.
  • The chart shows that the latest rally was subdued.
  • The chart shows this morning SOXL is seeing selling and has pulled back below the top band of zone 3.
  • The trigger for this morning’s selloff is concurrence between Dario Amodei (CEO of Anthropic), Sam Altman (CEO of OpenAI), and Elon Musk (CEO of Space Exploration Technologies Corp (NASDAQ: SPCX) that out of safety concerns, the development of AI frontier models should be slowed.
  • In spite of fear mongering, here are the factors that make it difficult to slow down AI:
    • Competition between AI labs
    • Competition from China
    • Momentum for existing AI data center projects
    • Pressure on AI labs to regenerate returns
  • The call for an AI slowdown is being muddied as politicians twist the facts to gain political advantage ahead of the midterm elections.
  • There is panic in the early trade in several AI stocks.  We have been sharing with you the probabilities of as much as a 30% – 50% pullback in some AI stocks.  At the same time, under a different scenario, the stock market can still run up from here after the period of seasonal weakness in September and October. 
  • Oil is rising this morning.  Brent crude has gone over $108 and WTI crude has gone over $104.
    • Iraq based fighters attacked Saudi Arabia’s East-West pipeline, forcing it to shut down.  Saudi Arabia has been using this pipeline to bypass the Strait of Hormuz.  The pipeline carries seven million barrels of oil per day.
    • Houthis have fired missiles on Saudi Arabia.
    • On Friday, oil fell and stocks rallied on the news of a pending meeting between Gulf countries and Iran.  The meeting has been postponed as the parties have failed to reach a consensus.

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), Alphabet Inc Class C (NASDAQ:GOOG), Microsoft Corp (NASDAQ:MSFT), and Meta Platforms Inc (NASDAQ:META).

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