Stock Market Outlook- Almost There

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The News Buzz

• Elon Musk has confirmed reports that 12,000 Nvidia H100 GPUs intended for Tesla's EV production were diverted to X. Musk says logistical challenges were behind the diversion as Tesla "had no place to send the Nvidia chips to turn them on, so they would have just sat in a warehouse."

• India is well-positioned to scale manufacturing in select sectors like electronics, auto, pharma and textiles in the next decade.

• AMD Is a Distant No. 2 to Nvidia. Its Stock Could Be a Winner Anyway. The company’s new AI chip looks like a runaway hit.

• Sharp declines in diesel, crude oil, and copper prices, along with signs of a demand slowdown in recent weeks, might indicate a weakness in the U.S. economy.

• The numbers: U.S. businesses added 152,000 new jobs in May, versus 175,000 as per an economist's poll, the smallest increase this year, payroll company ADP said. This appears to be another sign of a broader slowdown in hiring. Job gains and pay growth are slowing in the year's second half.

Momentum Investing

Many consider Momentum Investing to be the opposite of Value Investing, which we discussed last time. However, things about these two investment strategies are not as black and white as many perceive them. I will elaborate on this below.

Although not the first to suggest Momentum Investing, Richard Driehaus adopted this practice and integrated it into his strategy for managing his funds (American Association of Individual Investors (AAII)). He believed that more money could be made by "buying high and selling high" than by buying underpriced stocks and waiting for the market to reevaluate them.

What is the formula for momentum?

Momentum (Price, X) = (Present price) / (Average price over X previous days)

Traders and investors often use the Relative Strength Index (RSI), price rate of change (ROC), stochastics, and moving average convergence divergence (MACD) to gauge momentum.

What is a general view of Momentum Investing?

• Momentum investing is a strategy that seeks to profit from trends in the price of a security (stock, bond, etc.). Investors identify assets that have been experiencing upward price movements and aim to buy them, hoping the trend will continue. Once the price momentum slows, they sell the asset to capture the gains.

Key characteristics:

• Focus on Trends: Momentum investors believe past price movements can predict future performance. They analyze charts and technical indicators to identify assets with strong upward trends.

• Short-Term Perspective: This strategy is typically focused on short-term gains. Investors hold positions for a shorter duration compared to buy-and-hold strategies.

• Active Management: Momentum investing requires active monitoring of price movements and quick decision-making to buy and sell at opportune moments.

• Higher Risk: Since it involves buying assets that may be already inflated, momentum investing can be riskier than value investing, which focuses on undervalued companies.

How can BraVoCycles’ methodology improve Momentum Investing?

• As multiple cycles in a financial instrument occur, our cycle price projections method generates higher and higher targets, thus maintaining a momentum-based position.

• Moreover, the highest price target, time cycles turning points, EWT, and technical analysis that I use enable one to add to the position by buying dips at optimal times and ultimately exit the trade based on my comprehensive analysis rather than just the loss of momentum, which is only one or my criteria.

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Warren Buffet is Raising Cash

• Are you like Warren Buffet?

• I have been suggesting lately to raise cash on the rips.

Are You Raising Cash?

Daily Funds Inflows by Retail Investors

• Or, are you like retail investors?

• This may not end up well for some retail investors who are not nimble when the market reverses.

Market Summary

As of close on 5 June 2024.

What Has Been

• What Has Been

  • Tech stocks surge: Nvidia surpassed the $3 trillion mark on an intraday basis, Apple neared $3 trillion in market cap, and the Nasdaq was on pace for its 13th record close of the year.

  • Bond yields are down today. Bond markets are sensing trouble for the economy, which is unrelated to inflation. The Federal Reserve, focused on inflation, keeps interest rates high even as signs of an economic slowdown accumulate.

  • Barron’s: The Dow Jones Industrial Average ended the day 0.3% higher, while the S&P 500 gained 1.2%. The Nasdaq Composite led the gains, with a 2% increase. Both the Nasdaq and S&P 500 hit new highs. The Dow lagged because it doesn’t hold Nvidia and some of the other big tech names that scored big on Wednesday.

  • I find NVDA's explanation for DJI’s lagging naïve. We repeatedly pointed out to our premium subscribers that, based on EW patterns, SPX and NDX were likely to reach new highs while DJI was not.

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Read our Disclaimer

• After that bullish hammer several days ago, SPX and NDX showed resiliency and strength and are approaching . . .

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