The stock market is currently facing resistance, despite the aggressive buying from the momo crowd. Smart money, however, is trimming positions as the market reaches the resistance zone. The RSI indicates an overbought market, making it vulnerable to a pullback. The upcoming speech by Fed Chair Powell at Jackson Hole on Friday is a crucial event to watch, as it could significantly impact market sentiment.
Chicago Fed President Austan Goolsbee is cautious regarding inflation arguments, emphasizing that tariffs, while contributing to inflation, don’t cause prolonged price increases. The AI frenzy continues with NVIDIA leading the charge. AMD is trying to catch up by acquiring ZT Systems for $4.9B, aiming to strengthen its AI strategy and compete with NVIDIA. However, the analysis suggests that this acquisition is a small step and will not significantly impact NVIDIA’s market share.
Layoffs in the IT sector are expanding, with General Motors planning to cut 1,000 software jobs, adding to last week’s announcement of 4,000 job cuts by Cisco Systems. Mpox is spreading beyond Africa, but experts predict it won’t have a severe impact in the U.S.
Money flows are positive for NVDA, Apple, Amazon, Alphabet, Microsoft, and Tesla, while Meta Platforms shows neutral flows. SPY and QQQ exhibit mixed flows. Investors can gain an edge by tracking money flows and recognizing when smart money is buying stocks, gold, and oil.
Bitcoin is currently below $60,000, and there’s a disconnect between buying in bitcoin and buying in speculative stocks. Investors are advised to focus on the long term and consider a protection band consisting of cash, Treasury bills, or short-term tactical trades. The protection band should be adjusted based on individual risk preferences and market conditions.
Traditional 60/40 portfolio strategies are not currently favored, especially with regards to long duration strategic bond allocation. Those sticking to this approach should focus on high-quality bonds with a duration of five years or less. Bond ETFs can be used tactically, rather than strategically.
Remember, you can’t take advantage of new opportunities without holding enough cash. When adjusting hedge levels, consider partial stop quantities for stock positions and wider stops for high beta stocks.
