Brief Interim Update Aug 10, 2023

[SOL]

Despite the recent decline, the most recent Bullish sentiment reading comes in at 48. Although this is lower than last week's reading and the peak of 54.5 (rounded to 55), it remains quite high. AI stocks are beginning to shed some weight.

The initial wave involved stocks like AMD and TSM, which began to pull back around June. The second wave just began with APPL, and NVDA, MSFT, etc. Let's see whether the pullback in the AI stocks gains traction.

Currently, AAPL is the stock to watch closely. Later on, FB or TSLA might take the baton. If AAPL's weekly closing price is 176 or lower, a test of the 155 to 160 range is likely. This, in turn would suggest that other players in the AI sector are likely to face similar pullbacks

The corrective wave/pullback should continue until bearish sentiment touches the 50 range.


For the SP500, if the SPX falls below 4326 on a weekly basis, it should lead to a test and challenge of the 4160 to 4200 range.

[SOL]

United States Total Housing Inventory


The total housing inventory is currently at a multi-decade low, indicating that when interest rates start to ease, there's a high likelihood of a robust rebound in the housing market.


The monthly chart of Bonds

The bond market is very likely to mount a strong counter-rally, but it is also highly probable that it will test Oct 2022 lows first. The rally could take bonds to the 133 to 136 range with a possible overshoot to the 141 to 145 range. In the same vein, TLT should at least be able to test the 112 to 114 range, with a possible overshoot to the 121 to 126 range.


Palladium

From a long-term perspective, it's now a screaming buy.


Emerging Troubles in the World of AI

ChatGPT is a sophisticated AI system that demands substantial computing resources to function effectively. Maintaining ChatGPT's operations, including the necessary hardware and software, costs OpenAI about $700,000 per day. However, despite its subscription plans for GPT-4, the company is struggling to generate enough revenue to cover these expenses.

A recent report reveals that OpenAI has faced significant losses, totalling $540 million by May 2023. Additionally, the user base for ChatGPT has been rapidly declining, with the number of users dropping from 1.7 billion to 1.5 billion. This decline contrasts with the initial surge in users when ChatGPT was launched in early 2023.


https://sg.news.yahoo.com/openai-could- ... 04976.html

"The initial excitement is waning while costs continue to surge. Is this the earliest indication that not everything is harmonious in the realm of AI? Numerous companies poured substantial investments into bots that tend to hallucinate, and many entities are exaggerating their product capabilities. An ex-Vice President from Salesforce even attested that the company misled customers about its ability to process real-time data.
https://www.businessinsider.com/former- ... t%20claims.

Expect more such revelations to come to light. Several AI stocks are poised to shed at least 50% from their recent highs.


Oil

Oil has pulled back remarkably fast from the oversold to the overbought range, and this is particularly notable as it's taking place on the monthly charts. Oil is preparing for a challenge of its May 2022 highs with a potential overshoot to 140, a level not witnessed since 2008.

[SOL]

Here are a few excerpts in their raw and unedited format from the upcoming update, which is scheduled for release tomorrow.



Stock Market Long-term Outlook
All other indices have hit and exceeded our targets, especially for the NDX 100. The index that is trying to play catch up is the Russell 2000. While it could trade within the 1980 to 2020 range, it would fall under the higher risk category in the short to intermediate timelines. However, in the longer term, many stocks in the Russell 2000 will do well as they catch up with their peers. Smart money is going to rotate out of tech and into sectors that are out of favour.

Low to medium-risk players should be aggressively scaling out of AI and any high-tech plays that are part of the current frenzy. As we stated in May, stock and sector, rotation was and is still underway. Market Update July 10, 2023

The NDX (Nasdaq 100) was the strongest index and is now in a corrective mode. As it overshot the targets we issued by a wide margin (over 1000 points), it is the most likely candidate to experience a stronger pullback. However, the most dangerous corrective pattern is being exhibited by the Dow (discussed in more detail under the general market commentary section)

We have two levels of support for the NDX one starts in the 14,557; a weekly close at or below this level should lead to a test of the 13500 to 13,700 range (plus or minus 200 points). The second layer of support comes into play at roughly this range. However, the NDX could theoretically trade below 13,200 on an intraday basis without changing the bullish outlook. Only a monthly close at or below 13,200 would have the potential to change the pattern. However, as this is a low-probability scenario, we are not going to discuss this now.

The Russell 2000 (RUT) has recently traded past 2003 before pulling back. Compared to the Nasdaq and the S&P 500, the RUT has more room to run. For instance, the MACDs on the Nasdaq and SPX weekly charts are trading close to 98, while the MACDs on the RUT are around 89. If the RUT follows the path of the stronger indices, it could potentially test 2020 levels with a potential overshoot to 2028-2030 before topping out.[/i] Market Update August 16, 2023

It could not muster the strength to test the 2003 range again, and the MACDs on the weekly charts indicate that it is ready to follow the other indices, such as the NDX, SPY and the Dow. A weekly close at or below 1830 is likely to lead to a test of the 1700 range.

Overall while some indices like the NDX and Dow could experience sharper pullbacks, the markets are not expected to crash. Pullbacks should be embraced. Low to medium-risk investors should only allocate the stated amount of funds to the plays listed in the pending plays section, albeit preferably to low and medium-risk candidates.


Bullish sentiment readings dropped quite a bit. They are now just 0.5 (current reading 39) above the historical average (38.5), so this bodes well, for it indicates that the Crowd is becoming increasingly nervous.

[jonnyfrank]

SOL,

Thank you for sharing this.

[jonnyfrank]

NVDA earnings not helping the short idea...

[SOL]

NVDA earnings not helping the short idea...

NVDA is simillar to TSLA in many ways. There was a time when shorting TSLA was exceedingly risky. If someone intends to short, they should direct their attention to other stocks. The lack of substantial revenue despite the increased expenditure indicates stress arising in the AI sector. OpenAI might run out of funds by 2024; it burns around $700,000 daily.

Imagine this situation: think about what could occur if the people buying lots of shovels hand over fist can't find any gold. So far, despite spending a lot on AI, most companies haven't made much profit. It's like NVDA is the one selling the shovels and making money, but the shovel buyers need to discover something valuable, or they will stop buying shovels.

[jonnyfrank]

Fair enough. NVDA just happens to represent about 7% of QID holdings, which I have been look at buying as a short.