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VRA Investing Podcast: The AI Revolution, Market Momentum, and The Latest Earnings – Kip Herriage – February 05, 2024

In today's episode, Kip breaks down the latest tech earnings with Palantir reporting today and more to come this week. Kip also explains why we remain bullish on tech stocks over the medium to long term despite market fluctuation ...

Posted On February 05, 2024Episode 1319
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About This Episode

In today's episode, Kip breaks down the latest tech earnings with Palantir reporting today and more to come this week. Kip also explains why we remain bullish on tech stocks over the medium to long term despite market fluctuations and weaker market internals. Tune into today's podcast to see what the VRA Investing System sees looking forward for investors.

Transcript

Don’t look back because the market is closed. Good Monday afternoon, everyone. Kip Herriage here with the daily VRA investing podcast.

Hope you had a good day today. Hope your weekend is fantastic as well. Got a lot to cover today. Let’s get to it.

Breaking news after the close today, a couple stocks that we’re long here at positions in, I’ll just mention here, Palantir just reported earnings.

While the earnings look to have come in line to analyst estimates. That’s not the story here. The story is what’s being told on this guidance call from the company management, where they’re talking about an explosive level of growth that’s taking place inside of talend here. Here’s a quote from CEO Alex Karp. Our commercial business is exploding away. We don’t know how to handle, we don’t know what to do with the onslaught of demand. Some really good quotes like that coming from carp. Dan Ives, tech analyst extraordinaire, who’s been exactly right in our opinion, based on the roaring two thousand and twenty s and a potential melt up bull market.

[00:01:07]:
He’s, of course, a tech analyst. And he’s very bullish on technology stocks, believing that we have a next potential here for 1995 to 2000 melt up, which, of course, has been our call for some time. It’s what the NIS had to say for the future of AI, for the messy of AI. That’s what he calls Palantir for the messy of AI. It’s all about AI and the commercial business. Looking ahead. Robust commercial 24 guidance in line with our thesis as AI use cases exploding and AIP front and center, the AI revolution is here. We call it the innovation revolution.

Dan Ives and others call it the AI revolution. We think ours is more appropriate, but it doesn’t matter. At the end of the day, it’s all just a talk. What matters is price action. Price action is what matters. Palantir and after hours, up 16% at 1921. Also today, Trump Media, better known right now as DWAC. DWAC Digital World Acquisition Corp.

[00:02:08]:
Is the current name. Of course, everyone’s waiting for the SEC to approve their merger with SPaC company TNTG, Trump Media Technology Group, which, of course, would be the final name of this company. And I’ll write this up for tomorrow. But our theme on this has been pretty consistent and pretty simple from the very beginning is that there’s a cult following with anything that Trump touches. Okay, that’s not meant to be an insult. It’s just reality. There’s a huge cult following of one Donald J. Trump.

And frankly, folks, there’s only one way to play social media companies from a public. There’s only one company that is a pure play as a social media company, and that is DWAC. There is no other pure play now that Twitter is no longer public and that meta, of course, these other companies have so many other divisions beneath them, there’s no pure play. DWAC is that pure play. And so we own this stock and it’s up 15% right now. It looks to me like to be a gamma squeeze. Just under $47 a share. It’s had a pretty huge run here in the last.

[00:03:17]:
What is this? Let me pull back a little bit here. A short period of time. Yeah, the stock has gone from, sorry, wrong chart. Since the middle of January. Since January 15, to be exact, the stock has gone from $17 a share now to just under $47 a share. Volumes exploding, which tells some of the story. But you really have to look at the options trading. We were pretty active in AMC during the hot move higher in meme stocks, and we essentially piggybacked on what was happening with call volume explosion, which is basically what they call a gamma squeeze, where because of structural reasons, when someone purchases, a group of people purchase a lot of out of the money calls that expire in the near term, meaning one, two, three weeks away.

[00:04:15]:
That forces buying to come in in the common stock. It’s a structural, I don’t know if it’s a flaw, maybe instead of a design flaw, maybe it’s a feature. But people have gamed this options market out. And now all you have to do is take a look at the options volume is taking place. And the February 9 calls and the February 16 calls of DWAC, especially in the shorter term, one of the 9th calls which expire, of course, this Friday. And you’ll get a sense what I’m talking about. Thousands, thousands upon thousands of calls being purchased that are out of the money. Up to $100 a call today, 3000 calls traded.

This is not a large dollar amount, but 3000 calls traded for the $100 strike price calls for DWAC that expires on Friday. So again, these are two that we hold here and that we’re watching very closely. So I wanted to start this today with that. We’ll have a full write up on this, of course, out for our VRA subscribers here in the very near term. Good to see this action, especially Palantir, which is the VRA ten bagger. This news today was important. We needed this guidance from the company and we needed to hear that AI is actually a real thing for them instead of just a buzword like.com the company threw on the back of their name in the 95 to 2000 meltdown, Palantir looks to be very real. This is a good quarter for them.

[00:05:44]:
Very good to see. All right, listen, last week was of course, another big week for our markets. What was it, 13 out of 14 weeks? The markets have been higher for our major indexes. Pretty stunning run that’s taking place here. Of course, all time highs took place on Friday. And the Dow Jones SP 500, fueled by extraordinary growth from Amazon and meta, those are the two that really jumped eight to 20% on Friday. And as I pointed out this morning, it’s kind of a common sense statement. But folks, when companies at market caps of more than a trillion dollars, and of course both Amazon, Meta and Microsoft all fit that bill, when companies with market caps of more than $1 trillion see their shares jump 8% to 20% off a single earnings report, and this happens in minutes, it might just be a sign that you’re in the roaring 2020s.

We think, of course, that it is. And we think again, this is the beginning of extraordinary growth to come from tech stocks in the months and years to come. As we’ve said many times, this is the time, folks, to stay locked in because these wins are going to just keep rolling from one company to the next. That’s the way we’ve structured the VR portfolio to play out. That’s exactly how we believe it’s going to play out as we’re very long and strong tech stocks. And of course, semis fit that bill as well. Semis today, by the way, even with a weak market today, I’ll cover that. Now, Dow Jones today finishing down 274 points of seven tenths to 1%.

[00:07:18]:
Rs 200 was down about half of that, down three tenths of 1%. Rust 2000 are a loser on the day, down 1.3%. Nasdaq today battle back. Markets battle back throughout the day. Again, that’s what you want to see. Nasdaq finishing down just two tenths of 1%, just down 31 points. But again, semiconductors, SMH, semi ETF up 2.1% today. As Tyler just reminded me, that is another closing all time high.

It’s been a few weeks since we’ve seen that, maybe two, three weeks. Good to see semis leading the way again. Actually shared a chart this morning with our VR subscribers. It’s been one of the big reasons we’ve been so incredibly bullish from the birth of this bull market, which now look back into the bear market was of course October the 13th, 2022. But from the bottom of that bear market, the semis have led higher, they’ve led the SP 500 higher. That’s our bogey. When the semis are leading higher, there is no better tell. That is the tell that is the thing to key off of.

[00:08:17]:
So it’s extraordinarily good news after what was a purely weak open today to see the semis go so what? We’re not the rest of the market, we’re the semiconductors. We’re going to keep going higher. That’s your tell for the rest of the broad market and where it’s heading, folks, we believe in playing repeating patterns until they no longer repeat this repeating pattern. The semis leading in both directions, by the way, has been in place since the birth of quantitative easing following the financial crisis in 2008 2009. Again, it remains to the tell and you’ll have a couple of days here or there where you have a shakeout or whatever, but that’s not what matters. What matters is what is the longer term trend. Medium, intermediate and longer term trends, what are they telling us? And they are flashing continue to flash major buy signals for both the market and certainly for semiconductors and tech stocks as this AI or innovation revolution rolls on. Very good to see all of this today.

[00:09:19]:
One note though is that the internals were not good. Again Friday we talked about this again today we’ve got bad internals. Again, the market was down today, so you kind of expect it, but we don’t want to see this become our new normal. For example, today we had four to one negative advanced decline for NYSE, three to one negative for Nasdaq on advanced decline. Volume today came in 84% down volume to NYSE. Again, not what you want to see. We don’t want to see a bifurcated market with just a few stocks going higher. We don’t think that’s what we’re going to see.

But again, we’re just reporting what we see here. We want to see these internals improve and they have peaked as of, I think Tyler just told me, as of about two months ago, the internals peaked and now they have not been great. Of course, again, we’ve had an amazing year last year, a little bit of a shakeouts, to be understood. Bad boy is not a great month for the markets from an analytical point of view and seasonality. But again, it’s just acknowledging what we’re seeing here, that we want to see these internals improve. Right now we’re at ten out of twelve VRA investing system screens that are bullish. That is back up the truck territory. But we don’t want to have to go back to nine to twelve screens bullish unless the internals improve, we’ll have to.

[00:10:38]:
But again, it’s just a yellow light. But it is something we’re watching very closely. 84% down volume day. NYSE is not what you want to see in this kind of a bull market. Volume was better for Nasdaq, not a whole lot better. 68% down volume day. Again, not horrible at all by any means, but again, Nasdaq just down 31 points. You’d like to see better readings of this.

Finally, new 52 highs. Lows came at 163 stocks hitting a new 52 week high to 297 stocks hitting a new 52 week low. So the internals today were clearly negative across the board. Sector watch, more of the same, really. Nine of eleven sectors finished lower today, led to the downside, but materials down two and a half percent, utilities down 2% as a ten year yield continues to tick up now 4.16%. CME Fed tool Fed market Watch now has as of this morning, just what is this just a 60% probability that the Fed is going to cut rates at their March meeting? Of course, I’ve been on record and still I’m on record. It’s saying that they’re going to cut. But again, the strong jobs report on Friday may have put the kibosh on a Fed rate cut in March.

[00:11:58]:
Again, if they said time and again, though, they’re data dependent folks, I’m telling you straight up, it won’t take more than a couple of weak inflation reports showing continued disinflation, deflation, or some poor economic data to jump to the surface with maybe some weakness in regional banks really starting to flare up again. I’m just telling you, it will not take much for the Fed to change their mind. I think Powell whiffed when he said that he doesn’t think they’ll cut in March. I think that was a whiff. Again, I could be wrong here. We’ll wait and see. Also of note today, as I pointed out this morning, just to give you an idea of how far away we are from being overbought. Okay, this probably makes the case as clear as anything that I could share with you.

As we started trading today, only 66.4% of the SPF of 100 is above its 50 day and just 72% above the 200 day. Folks, we started the new year. These readings were 93%, 81% again, we’re 66 and 72 now. So until these readings are above 90% again, that’s where we were in January as your start of the year. On the 50 day, at least until these readings are above the 9% level, we’re just not going to be flashing signs that we’re concerned about this market. And by the way, based on our momentum oscillators, we’re not there either. We’ve worked those off a little bit. So we’re coming off extreme overbought.

[00:13:23]:
We had of a week and a half ago and now we’re starting to see the other internals start to show some weakness here. But again, as a contrarian, that’s what you want to see. You don’t want to see these indicators and these tools that we follow start to hit extreme overbought levels because that’s more of a concern of, okay, we could be in for a slow two to four weeks as the market shakes out. We’re just not seeing that right now. So earnings should take care of the rest of this. We’ll continue to play by here. We can remain, again, extraordinarily bullish. Everything I’m talking about here is either from a short term traders point of view, just to give folks an idea of when to put new money to work.

[00:14:01]:
That’s really what this is about, putting fresh money to work. We already have our positions in place. Now we’re looking to add to those and buy the dip which has been the smart money play from the birth of this bull market. Let’s take a look now at our commodity watch. More weakness today, not a lot of it, but some weakness. Silver today was actually down one and a half percent to 22 43 an ounce. Gold today down $12 an ounce. About a half percent to 2041 an ounce.

Crude oil today, barrel to 72 81 a barrel. And finally, the day cryptocurrencies, bitcoin just off a bit today, down three eightyn at 42,388. As a reminder, the next bitcoin having is taking place in 78 79 days. I think we’re going to see an upside move heads into that having. That’s been pretty common. And again, the shakeout from the SEC approval kind of still buy the rumors, sell the news. But again, this is very, I think a very bullish setup here for cryptocurrencies. I’m expecting a move through $100,000 this year on bitcoin.

And I saw this morning calls for 150,000 next year by some folks that we respect and trust.

All right, folks, that’s it for the day. Hey, always appreciate you listening. Hope you had a great day and even better night. We’ll see you back here again tomorrow after the close.

Podcast Newsletter

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Time Stamps

00:00 Strong earnings but explosive growth is key.
05:44 Markets continue to surge with all-time highs.
08:17 Semiconductors leading market with major buy signals.
11:03 52-week high reached, 52-week low downside.
13:23 Market internals show some weakness, earnings promising.

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