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Key Data For AI Trade

Please click here for an enlarged chart of Alphabet Inc Class C (NASDAQ:GOOG).

Note the following:

• This article is about the big picture, not an individual stock.  The chart of GOOG stock is being used to illustrate the point.
• The chart shows GOOG stock is gapping down after earnings.  GOOG stock is down over 11% as of this writing in the premarket.
• The chart shows GOOG stock drop of 29.5% from the peak.
• The reason GOOG stock is falling is because earnings show search growth has slowed.  On the positive side, Alphabet’s cloud business is booming.
• In our analysis, here are the key points for investors:
  • Alphabet has been able to finance its other businesses because of the highly profitable search business.  Slowing search business is a warning signal.
  • Alphabet’s Q3 free cash flow was negative $9.065B.
  • When GOOG stock was running over $400 as shown on the chart, most analysts were upgrading GOOG to strong buy ratings.  Momo gurus were urging their followers to aggressively buy GOOG stock, claiming GOOG was the lowest risk way to profit from AI.
• We have been repeatedly warning that Google’s search business could come under pressure.
• Alphabet earnings are a significant negative data point for the AI trade.
  • Another negative data point for the AI trade is Caterpillar Inc (CAT) earnings.  CAT has benefited tremendously from AI data center construction.  As of this writing in the premarket, CAT stock is falling 12% as its revenue missed whisper numbers.
  • A positive data point for the AI trade is Microsoft Corp (MSFT) beating whisper numbers.
  • Two additional data points for the AI trade are ahead.  Intel Corp (INTC) and Amazon.com Inc (AMZN) will report earnings after the close.
• PCE is the Fed’s favorite inflation gauge.  Inflation came inline with expectations but is well above the Fed’s 2% target.  Here are the details:
  • Headline PCE came at 0.5% vs. 0.5% consensus.
  • Core PCE came at 0.3% vs. 0.3% consensus.
• The U.S. economy is 70% consumer based.  For this reason, prudent investors pay attention to personal income and personal spending.  The data shows consumers continue to spend even though their incomes are falling   Here are the details:
  • Personal spending came at 0.5% vs. 0.3% consensus.
  • Personal income came at 0.2% vs. 0.3% consensus.
• GDP data shows that the U.S. economy grew faster than expected.  Here are the details:
  • Q3 GDP Advanced came at 3.4% vs. 3.0% consensus.
  • Q3 GDP Chain Deflator Advanced came at 2.2% vs. 3.5% consensus.
• Initial jobless claims came at 194K vs. 196K consensus. This indicates that the jobs picture is stable in spite of massive layoffs in the tech sector.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis. 

In the early trade, money flows are positive in Apple Inc (NASDAQ:AAPL), Meta Platforms Inc (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are negative in Amazon.com, Inc. (NASDAQ:AMZN), Alphabet (GOOG), and NVIDIA Corp (NASDAQ:NVDA).

In the early trade, money flows are neutral in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (USO).

Bitcoin

Bitcoin (CRYPTO: BTC) is seeing selling.

What To Do Now

Consider continuing to hold good, very long term, existing positions and add tactical positions based on signals.

The Arora Report is known for its accurate calls. Most recently, we correctly called the rally from recent stock market lows and the 2026 semiconductor decline before a 25% drop in the Semiconductor ETF (SMH). In gold, we bought at an average price near $1,105, close to cycle lows, and took partial profits near $5,400, close to cycle highs. Please click here for our free forever Generate Wealth Newsletter.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.