Weekend Market Report
Good morning and welcome to another edition of the Weekend Market Report! We’re reorganizing the market report a bit and starting off with the general market commentary on gold, silver, and S&P500 historical volatility model results, then followed by some interesting links and a stock or ETF in the spotlight. Hint: this week it’s about the Q’s.
General Market Commentary
Last week was a shortened trading week due to the July 4th holiday. All the indices I track (Dow, Nasdaq, S&P500), except the Russell 2000, closed higher this week.
The gold price forecast model is currently 60% correct as last week’s price forecast was for gold to close higher and it did. The silver price forecast model is currently 80% correct as last week’s price forecast was for a higher close this past Friday, which ir did. The S&P500 historical volatility forecast was for higher volatility last week and initial data shows that it did, so the model is currently 100% correct.
Nvidia Gets Rare Downgrade
How’s this news to throw some cold water on a hot dog? Nvidia got downgraded because of a health check.
New Street Research analyst Pierre Ferragu downgraded Nvidia shares NVDA, -1.91% to neutral from buy in an industry report that he dubbed a “health check” on artificial-intelligence stocks. Now eight of the 62 analysts tracked by FactSet have neutral-equivalent stances on Nvidia’s stock. - via Market Watch
You know what, they’re probably right but a bit too early. The whole Generative AI thing feels like it’s starting to peak (see below).
Goldman Sachs Says the Return on Investment for Ai Might Be Disappointing
The market is in love with AI right now and spending big bucks on it, to the tune of $1 trillion dollars. If it’s a Generative AI (GenAI) application then chances are that Nvidia chips are running the calculations for it. Yet Goldman Sachs is cautious.
As companies prepare to spend over $1 trillion on artificial intelligence, a Goldman Sachs report examined the big question at hand: “Will this large spend ever pay off?”
Yes, where is the massive payoff? We only hear about how AI will streamline your organization and make you rich - somehow - but where’s the payoff? This is particularly the case with GenAI.
“AI technology is exceptionally expensive, and to justify those costs, the technology must be able to solve complex problems, which it isn’t designed to do,” Jim Covello, the head of Global Equity Research at Goldman Sachs, said in the report.
“The starting point for costs is also so high that even if costs decline, they would have to do so dramatically to make automating tasks with AI affordable,” he added. “In our experience, even basic summarization tasks often yield illegible and nonsensical results.” - via MSN
When the AI bubble breaks, it will take the Nasdaq down hard and fast. Keep your stops sharp and your nose to the markets.
Here’s the Goldman Sachs report:
Nancy Pelosi Disclosed Stock Market Trades Made by Her Husband. He Loaded up on Ai Plays Like Nvidia and Sold Tesla
If this isn’t a Bullish indicator on Nvidia and Broadcom then I don’t know what is.
Paul Pelosi, who is an investment professional, increased his exposure to the AI boom by buying shares of Nvidia and call options on Broadcom, according to a disclosures filed by Nancy Pelosi on Tuesday. - via Business Insider
What I don’t get is this, don’t they have enough money? Don’t they want to retire to some island and live out their remaining life being pampered? Why amass all this money and not use it? Once I hit my magic money number I’m out the door.
Silver Price Forecast 1 Week Ahead
Silver closed at $31.52 from $29.43 last week, a rise of +6.63%. Last week’s price direction forecast was correct. The model is currently correct for price direction 80% (4 out of 5).
The mean silver price forecast for next week is higher. We are forecasting a possible swing high price of $33.53 and a swing low of $29.68 for next week.
The 4-week outlook for prices looks to be flat to slightly higher.
Gold Prices Forecast 1 Week Ahead
Gold closed up to $2,399.80 from $2,336.90 last week, a rise of +2.69% Last week’s price direction forecast was correct. The model is currently correct for price direction 60% (3 out of 5).
The mean forecast for the Gold prices is higher for next week. A swing high price of $2,464.73 and a low of $2,340.18 is forecasted.
The 4-week outlook for prices looks to be flat to slightly higher.
S&P500 Historical Volatility Forecast 1 Week Ahead
Last week’s 5-day historical volatility model closed at 0.066 from 0.065. The 5-day historical volatility (HV) for next Friday is to close lower.
The directional forecast model is currently 1 for 1, or 100% correct. Note, that this accuracy will probably drop to about 60% accuracy over time as we test it in the field.
The forecast is predicting flat HV for the next 4 weeks.
A Look at the Nasdaq 100 Trust (QQQ)
I looked at my QQQ position this week to think back to the time when I first bought some shares. That was in April of 2020, as the COVID-19 pandemic panic tore through the markets. I bought it at $217 price point back then and as of last Friday, it traded at $496.16 - another all-time high!
Technology is HOT right now. I looked at the top 10 holdings of QQQ and compared their relative performance to each other since October 2022, when the COVID-19 pandemic seemed to have gotten under control. It turns out that not all technology stocks have performed equally.
The big ones leading the top 10 are NVDA, AVGO, and META. The others, except TSLA, are doing good too but pale in comparison to the top 3.
So why am I looking at these top 10 stocks in QQQ? Simply put, I’m getting a bit worried that I have too much exposure risk to these names in various ETFs. I own SMH and XLK, as well as other mutual funds that are outperforming the market right now and are heavily tech-laden.
That’s all great and one important adage in trading is to “let your winners run” but the trick is to lock in your gains and take profit. I’d hate for all this to go tits up and then kick myself for not securing any of the gains for the past few years.
Will I sell QQQ? Probably not, but I might sell XLK. Will I sell my holdings of NVDA? I’m not planning on it but I want to hold through earnings in late August and listen to what Jensen says on the conference call, then decide.
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