Weekend Market Report
Another volatile week in the technology sector comes roaring to a close this week. In this Weekend's Market Report, we examine the technology sector selloff, highlight Meta's earnings, shine our stock spotlight on Motorola (again), and much more. Get your latest volatility and metals price forecasts for free subscribers below.
General market commentary
Another volatile week in the Technology sector. We had some violent selloffs in the semiconductors that included the usual suspects: Nvidia, SMH, Intel, etc. Granted, this is earnings season and things can and do get wild, but this feels different. It feels as if the strong hands are moving behind the scenes.
Of course, I have no rational basis for this feeling of mine and I could just be wrong but I do know that the markets are one giant discounting system that looks into the future. Millions of participants look at the same data, and read the same news I do, then adjust their bets accordingly.
Right now, the markets are discounting (ahem, selling) semiconductor stocks because they don't like the news coming out of different earnings calls. More and more reports are coming out wondering if AI has peaked. Everyone always gets nervous about being a bag holder so they sell first and ask questions later.
What could happen in the technology market right now? I'm looking for support right now, especially on Nvidia (NVDA). I do believe there's a chance it could bounce higher pre-earnings but it is continuing to make lower-highs and lower-lows, a bearish sign.
Long holders of gold and silver saw closing prices rise for the week. Gold closed higher and silver moved higher this week negating our forecast for lower prices. The gold and silver price forecast models are currently 67% correct for directional price forecasts.
The S&P500 historical volatility forecast was for lower volatility last week and initial data shows the forecast to be correct, so the model is currently 80% correct.
We expect the % accuracy to vary until we have at least 10 predictions or so. We'll evaluate the model then if it's bunk or not and anticipate the directional accuracy to be between 60 to 80% correct if the backtesting is valid.
META earnings exceed expectations BUT...
Meta had a great earnings report and traders were rewarded with a major gap open into a runaway train of a selloff. Our trend trading system took us out right before earnings and we missed this gap higher but don't be fooled, investors are hedging their bets on Meta's investment in Generative AI.
The Facebook parent's revenue and earnings-per-share beat consensus analyst estimates, driven by better-than-expected advertising sales.
Like other tech giants, Meta has been heavily investing in generative AI with little to show for it so far, but CEO Zuckerberg defended its spending plans in the earnings call Wednesday. - via MSN
The technical analysis is unclear but the long-legged doji of Friday's close indicates a period of consolidation might be coming. After such a big gap up, traders couldn't hold on to gains. This price action is flashing a warning and I expect the euphoria on Meta to wane.
Morgan Stanley Wonders About AI's Payoff
Here's another investment bank wondering if AI has jumped the shark (peaked).
In short, investors’ fears can be boiled down to: is all of this actually worth anything [ed. sic AI]? Or is it just another shiny object the industry is chasing to bring back its dreams of endless growth, before it abandons it and moves onto the next big thing?
As Morgan Stanley analyst Keith Weiss put it on Microsoft’s earnings call: “Right now, there’s an industry debate raging around the (capital expenditure) requirements around generative AI and whether the monetization is actually going to match with that.” - via CNN
The pieces are falling into place with more clues telling us the (Generative) AI is peaking or has peaked.
Intel Falls Off A Cliff
I have owned Intel (INTC) via a DRIP account for many years but I stopped adding money to it last year. A once high-flying stock, it has since fallen into mediocrity. This week, it fell off a cliff.
Chip giant Intel's (INTC) stock price cratered than 26% in Friday trading, closing out one of its worst trading days in 40 years. The massive declines followed a disastrous second quarter earnings report Thursday during which the company shared anticipated third quarter earnings below Wall Street expectations and announced that it would be cutting 15% of its workforce and suspending its dividend payments amid a broader restructuring plan. - via Yahoo Finance
Then there's the layoff of 15,000 employees and CPU chip quality issues. It's sad to say but Intel is in a world of hurt right now.
If you're thinking of buying some Intel now, don't do it. Never catch a falling knife, instead pick it up when it landed.
Also included is this week's stock spotlight on Motorola (MSI).
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