Benzinga - by The Arora Report, Benzinga Contributor.
To gain an edge, this is what you need to know today.
Major Risk Ahead Please click here for a chart of Invesco QQQ Trust Series 1 (NASDAQ: QQQ).
Note the following:
- There is a major risk to the stock market in four days coming from China.
- Right now, prudent investors are paying close attention to Taiwan. Prudent investors look ahead. As usual, the momo crowd is oblivious because the momo crowd is mostly caught up in the present momentum and does very little good analysis.
- The chart shows Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM) compared to QQQ.
- Taiwan Semiconductor is based in Taiwan. Foxconn, the manufacturer of iPhones, is also headquartered in Taiwan. The Taiwan economy is rich with technology. Taiwan ETF EWT is 62% technology based.
- The chart shows TSM lagging behind QQQ. TSM has underperformed by 23.8% despite being the manufacturer of the chips that power artificial intelligence. We would not be in the golden age of AI without TSM.
- NVIDIA Corp (NASDAQ: NVDA) and Advanced Micro Devices, Inc. (NASDAQ: AMD) stocks are running up on a renewed AI frenzy. AI chips from both companies are manufactured by TSM. TSM also manufactures the brain of iPhones. At this time, there is no other company in the world that can match the advanced manufacturing capabilities of TSM. TSM stock is not getting a premium because of the China risk.
- TSM just reported earnings. However, it is not the earnings that are driving the stock; it is the China risk.
- TSM has traded as high as $145 in January 2022. At that time, NVDA traded at $284.80. Now, NVDA is trading at $535 and TSM is trading at $102.
- TSM has underperformed due to the risk of a potential invasion of Taiwan by China. We have been sharing with you that prudent investors need to be aware of the China risk.
- The Taiwan presidential election will be held on January 13.
- China has threatened to invade Taiwan if the pro-independence candidate Lai Ching-te of the Democratic Progressive party is elected.
- Lai Ching-te is leading in the polls by 3% - 10%.
- Taiwan’s elections are regarded as the most free in the world. China is attempting to influence the outcome.
- If China invades Taiwan, it will be a huge negative for the stock market.
- In the early trade, the U.S. stock market is consolidating, waiting for CPI data tomorrow.
- As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band.
Magnificent Seven Money Flows In the early trade, money flows are positive in Nvidia (NVDA).
In the early trade, money flows are neutral in Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc Class C (NASDAQ: GOOG), Meta Platforms Inc (NASDAQ: META), Microsoft Corp (NASDAQ: MSFT), and Tesla Inc (NASDAQ: TSLA).
In the early trade, money flows are negative in Apple Inc (NASDAQ: AAPL).
In the early trade, money flows are negative in SPDR S&P 500 ETF Trust (ARCA:SPY) and Invesco QQQ Trust Series 1 (NASDAQ: QQQ).
Momo Crowd And Smart Money In Stocks The momo crowd is buying stocks in the early trade. Smart money is