Nvidia Becomes A Pawn in US-China Trade Talks; Musk Buys $1B in Tesla Shares, Signaling Commitment

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

Semis Become a Pawn

Please click here for an enlarged chart of NVIDIA Corp NVDA.

Note the following:

• This article is about the big picture, not an individual stock. The chart of NVDA stock is being used to illustrate the point.
• The chart shows NVDA stock has fallen below zone 1 (resistance).
• The chart shows NVDA stock may be in the process of filling the gap.
• NVDA is one of the most important stocks for this stock market due to its heavy weight in indexes.
• The chart shows the volume has been persistently lower than the past. This indicates that most investors who are going to buy NVDA stock have already bought. New investor demand will need a new trigger.
• In our analysis, the next big trigger for Nvidia is a wider adoption of its platform for robots. If robots proliferate quickly and Nvidia chips become the standard for robot brains, Nvidia has a path to become an $8T company. If Nvidia is not successful with robots, once the present demand for data centers fades, Nvidia stock can be cut in half. It is important for investors to have access to objective analysis of new developments and forgo the hype in the media.
• China is ratcheting up pressure on the U.S. using semiconductors as a pawn.
  • China says Nvidia violated China's anti-competition law.
  • China has launched an anti-discrimination probe and also launched a dumping investigation into chips. This investigation is to look specifically at analog semiconductor companies. The most impacted companies are Texas Instruments Inc (TXN), Analog Devices Inc (ADI), and Microchip Technology Inc (MCHP).
• Tesla Inc (TSLA) shares are jumping. Tesla CEO Elon Musk bought 2.5M shares of TSLA stock on Friday for about $1B. Musk is signaling his commitment to Tesla after the board approved a $1T pay package.
• In our analysis Tesla stock no longer trades on EVs but trades on the future prospects of humanoid robots and robotaxis.
• President Trump is coming out against companies issuing quarterly earnings. President Trump favors earnings releases every six months. He indicated it will save money and also help companies take a longer term perspective. In Europe, companies already report on a six month basis.
• In our analysis, President Trump is right that shifting to six month earnings will help companies have a slightly longer term focus. If quarterly earnings are changed to six month earnings, it will reduce the information available to the general public by 50%. Reduced publicly available information will be negative for average mom and pop investors.
• The stock market is awaiting the Fed rate decision that will be announced on Wednesday. President Trump is increasing pressure on the Fed saying, “"Too Late" MUST CUT INTEREST RATES, NOW, AND BIGGER THAN HE HAD IN MIND. HOUSING WILL SOAR!!!”

Magnificent Seven Money Flows

In the early trade, money flows are positive in Apple Inc (AAPL), Amazon.com, Inc. (AMZN), Alphabet Inc Class C (GOOG), and Tesla (TSLA).

In the early trade, money flows are negative in Meta Platforms Inc (META), Nvidia (NVDA), and Microsoft Corp (MSFT).

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).

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.