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Strategies & Market Trends : Trader J's Inner Circle -- Ignore unavailable to you. Want to Upgrade?

To: Trader J who wrote (56306)	7/26/2024 10:48:04 AM
From: Trader J	4 Recommendations Recommended By Fast Eddie Lou Weed Sonali Zen Dollar Round Respond to of 56532

We have fully entered into another one of those periods with the mega cap tech stocks where analysts continue to fall all over themselves in an upgrade and price target race, all the while the rotation out has clearly started. And we're starting to see some catalysts for surprise downside, though the setup still looks pretty good from my point of view. Every leg higher is usually met with this phenomenon where analysts table pound for higher price targets and it's sexy to be the highest. Then the rotation out of the what has been working starts taking effect leading to this gray area in between before any rally can continue. Specifically, the GOOGL, AAPL, MSFT and even the top AI names get caught up in it ... then the sky starts falling and the downgrade cycle happens as analysts try to force names into a distribution period, even AFTER most of the downside is already in. This played out to a huge degree in Apple's most recent downgrade cycle and run, dropping the stock into the $160s (maybe lower as I'm not looking at a chart) from $190s with a narrative of slowing unit sales, decelerating growth, etc. .... and of course they then rallied to $240 from the $160s as the wash of upgrades followed. The same type of move is now seen in GOOGL with search revenue, growth and competition as the narrative. AI names are starting to see the same type of downside catalysts with a narrative of competition, Asia, sales cycles and growth the culprits - all the while those same issues were present earlier. The only difference is they are now being preached during a period of weakness on volume. The moral of the story is that momentum is like the tides, but most people in the markets have their eyes on the talking heads more than on the water to see what is happening now. Market thoughts: 7/26/24 - What happens to the primary AI names here as we wait another month for NVDA will be a fascinating watch. At the same time, there aren't any companies (maybe AVGO and AMD) in the boat with NVDA so the fact that they remain the flag bearer may be a mistake. NVDA remains likely the purest and best play for the AI move and that likely means a lot of others have the potential to be well ahead of themselves. Finding those within the sphere of influence, those with complementary chips/technologies, with NVDA is an important exercise. ARM sure looks like one of those to me. TSM as a potential as well. I recently purchased MU with intent to average in more on further decline. Other interesting names are QCOM and MRVL. AVGO/AMD should be owned as well as those NVDA could pull up on the AI move itself. A lot of other chip names, however, I'm trying to steer clear of. As always, another interesting watch in the markets to see how this rotation plays out. This looks like an orchestrated summer doldrum selloff that many were forecasting (orchestrating?) to create value before the Fed easing cycle begins. Some are clearly expecting that a third rate reduction event is in ... with the first already being priced in as a bit of a surprise perhaps with the next meeting. Once that cycle begins, the stage is set for a nice rally to take us well into 2025. It could be powerful as long as we don't slip into recession. The last sentence is key and if it holds, that makes the selloff in mega tech and AI likely a large buying opportunity now, especially in those leaders who have sold off, primarily GOOGL, MSFT, AAPL, NVDA, AVGO, AMD, etc. This puts the 7/31 Fed meeting clearly in focus. If I wanted to take a risk-on bet, it would be on a potential first cut and narrative on 7/31 which could produce a powerful move higher for both stocks and bond prices.