The Reaper Comes for Chip Stocks

This week on Stock Market Soap Opera… [Morning Reckoning] March 12, 2024 [WEBSITE]( | [UNSUBSCRIBE]( The Reaper Comes for Chip Stocks Baltimore, Maryland March 12, 2024 [Greg Guenthner] GREG GUENTHNER Good Morning Reader, It’s all too easy to get caught up in the moment… But it’s important to remember we’re currently experiencing extraordinary market conditions. Semiconductors have posted a rally for the ages. Mega-cap tech continues to shove the top-heavy averages higher into what is traditionally a weak season for stocks. Even tiny, unknown cryptocurrencies are exploding as Bitcoin tops $70K and pushes to new all-time highs. It’s a speculator’s paradise – which is exactly why you should be on the lookout for trouble. You see, the stock market is always playing an amazing psychological trick on investors. It convinces our lizard brains that present market conditions will continue forever, whether we’re in the midst of a rip-roaring rally or a painful bear market. This phenomenon affects long-term investors, short-term speculators, and everyone in between. No matter your investing horizon, you get sucked into the herd mentality: This is how it is – and how it always was. Stocks only go up. Stocks only go down. Stocks will be stuck in this chop forever. Whatever the conditions, we convince ourselves that it will always be this way. Of course, this couldn’t be further from the truth. If we can yank ourselves out of this collective stupor, we’ll remember just how bearish the world looked a few short months ago in October 2023 – just before this huge rally caught everyone off guard. I’m not just talking about sentiment. Ominous feelings had been building since the summer rally began to fade into the third quarter. But many stocks were taking huge hits, with some names getting awfully close to violating key support levels. The bad news was piling up left and right, and It looked as if the market was about to roll over… until it didn’t. Then, seemingly out of nowhere, a huge oversold rally appeared. This rally snowballed into a full-fledged melt up into the holidays, picking off the bears left and right. The action eventually convinced just about everyone that this was the market default, not that choppy mess from the past few months. If there’s one constant in the markets, it’s that right as you begin to get comfortable with the current conditions, they abruptly change. [CRYPTO ALERT: 5 Coins to Skyrocket on March 13]( [Click here to learn more]( Crypto Millionaire James Altucher has pinpointed 5 tiny coins set to explode from an imminent “Trigger Event” on March 13 th, precisely at 08:55:35 am EST. This event could generate gains 20X bigger than Bitcoin by the end of the decade, minting 1000’s of crypto millionaires over the coming years. [Click here to get the full story: 5 Tiny Coins Set To Skyrocket.]( [LEARN MORE]( A Dreaded “Reversal Day” You’re probably sick of hearing about NVIDIA Corp. (NVDA) and its unstoppable run. But I’m seeing some new developments right now that could cause one of those sudden market shifts we’ve discussed today… While I don’t believe “calling tops” is a repeatable edge we can exploit in the markets, I think we might have just spotted a dreaded reversal day in the high-flying semiconductor stocks. Here’s how it went down: NVDA pushed closer to the $1,000 mark early Friday – a round-number target the bulls have been eyeing since the stock blasted higher off its February earnings report. But NVDA fell short of four digits, stalling out in the $970s as an actual pullback began to form. The stock was red before midday and continued to fall into the afternoon session. By the closing bell, the early gains had evaporated and the stock finished the session down more than 5%. Now, we’re staring face to face with a bearish engulfing candle following one of the most insane rallies in recent memory. If I were neck deep in out-of-the-money NVDA calls heading into the weekend, I would’ve had trouble sleeping at night. Friday’s potential reversal day hasn’t led to a major whoosh lower in the semiconductors. Not yet! But trading action throughout the group was muted at best on Monday, so I would stay on high alert for a sudden swing lower. Once the speculator class realizes it can’t count on these stocks to push higher every single day, they will abandon them for other plays. My final word of caution with the semis: I don’t think it’s wise to attempt to quick-call a major crash in NVDA shares (or any other semiconductor stock, for that matter). Stay on the lookout for downside action – but don’t load up on the short side without confirmation that a move lower has started. As the market has already demonstrated, these big rallies can last a lot longer than we think… Your Next Big Trade I’ve spilled a ton of ink this year following the semiconductor soap opera. But if the overbought tech rally is finally settling down, you’re going to want to get a head start on the rotation trades that are already flashing buy signals. I wrote about some of these key breakouts last week, including the small-cap Russell 2000 approaching new two-year highs. For the record, I still see the Russell playing “catch-up” with the big boys into the summer (this is, in fact, one of the big market predictions I made way back in December). There are other trades that are also quite intriguing right now – even if most folks aren’t paying close attention. What about gold? No, I’m not talking about the rip-roaring crypto bull. Instead, I want to highlight an old-school gold breakout to new all-time highs. Gold has settled higher for nine straight sessions as it closes in on $2,200 for the first time ever. Impressive! But words don’t do the chart justice… I chose not to draw any lines on this long-term gold chart dating back to the mid 2000s. Price speaks for itself. Gold has finally extended higher following numerous failed attempts going all the way back to Aug. 2020. This breakout looks like the real deal – and I would not be surprised to see it quickly extend higher in the weeks ahead. In fact, I believe it could trigger a multi-year run like we experienced during the last commodity super cycle, illustrated by the sharp move higher into the 2011 blow-off top back toward the left side of the chart. Of course, there are multiple ways to play this breakout. Silver will probably be in play, as well as copper. And the beaten-down gold miners will also enjoy some time in the sun (we currently have a bullish options play on the Van Eck Gold Miners ETF (GDX) over at The Trading Desk). As market conditions inevitably change, those who are slow to adapt will miss the beginnings of these important rotations. Save yourself the trouble of chasing the FOMO rallies that are getting a little long in the tooth – and hop on some fresh breakouts instead. Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [Attention! Before You Read Any Further…]( Before you read any further in today’s issue, an urgent situation needs your immediate attention. If you don’t plan on [claiming this new upgrade to your Strategic Intelligence subscription,]( you’re missing out on a huge opportunity. Right now is your chance to grab one of the biggest (and most valuable) upgrades our company has ever made to a newsletter. I’m taking Strategic Intelligence to an entirely new level and I’d hate to see you left behind. [To see how to claim your subscription upgrade, click here now.]( Once you’re done with that, read on to see today’s issue. [LEARN MORE]( In Case You Missed It… Poet, Rebel, Astronomer Sean Ring, Editor [Sean Ring] SEAN RING Good morning Reader, I’m writing from Riyadh, Saudi Arabia, but I didn’t have enough time to explore the city and report back to you. I’m very sorry about that! Fifteen years ago, life as a financial trainer was much different. The trips were longer, at fancier hotels and better paid. And as a single man, I had time to read. Now, it’s in and out, flying economy, with no time to enjoy the place. Thinking back to my more luxurious travels to the Arabian peninsula, I remember reading a book about one of my heroes. His name is Omar Khayyam. It’s a name that usually conjures images of Persian gardens, existential musings under starlit skies, and elaborate mathematical treatises. Khayyam remains one of the most intriguing figures in the annals of history. Born on May 18, 1048, in Nishapur, in present-day Iran, Khayyam was not only a distinguished poet but also a mathematician, philosopher and astronomer whose works have left an indelible mark on the world. This essay aims to weave together the threads of his poetic and mathematical achievements, drawing upon insights and remarks from Hazhir Teimourian's seminal work, Omar Khayyam: Poet, Rebel, Astronomer, which I thoroughly enjoyed. Khayyam's mathematical genius was evident early in his career. He made significant contributions to the understanding of the parallel postulate in Euclidean geometry, laying the groundwork for non-Euclidean geometry. Moreover, his work on algebra, particularly on the classification and solution of cubic equations, demonstrated his profound analytical skills. His treatise on algebra was among the most essential works in the field until the Renaissance, showcasing methods for solving cubic equations by intersecting conics. However, perhaps in his astronomical endeavors, Khayyam's blend of mathematical prowess and philosophical insight shines brightest. Appointed as the head of a commission to reform the calendar, Khayyam calculated the length of the year as 365.24219858156 days, a measurement remarkably close to the modern value. This reform resulted in the Jalali calendar, which was more accurate than the Gregorian calendar introduced almost five centuries later. This accomplishment underscores Khayyam's mathematical brilliance and his dedication to practically applying this knowledge. Turning to Khayyam's literary contributions, his Rubaiyat (quatrains) occupy a special place in world literature. Through Edward FitzGerald's English translations in the 19th century, Khayyam's poetry gained widespread acclaim, captivating audiences with its blend of melancholy, existential reflection, and sublime resignation to fate. The Rubaiyat contemplates the mysteries of existence, the fleeting nature of life, and the pursuit of happiness within the constraints of an unpredictable world. Khayyam muses on the human condition, urging readers to cherish the present moment amidst the impermanence of life: "A Book of Verses underneath the Bough, A Jug of Wine, a Loaf of Bread—and Thou Beside me singing in the Wilderness— Oh, Wilderness were Paradise enow!" These lines encapsulate the essence of Khayyam's philosophical outlook—a celebration of life's simple pleasures, an acknowledgment of life's transient beauty, and a contemplation of the universe's vast, unknowable mysteries. Teimourian's Omar Khayyam: Poet, Rebel, Astronomer provides a nuanced exploration of Khayyam's life and works, highlighting his rebellious spirit against the dogmas of his time. Khayyam's skepticism of religious orthodoxy and his questioning of life's meaning reflect a profound intellectual independence. Teimourian portrays Khayyam as a polymath and a human being grappling with the fundamental questions of existence, driven by an insatiable quest for knowledge and understanding. Moreover, Teimourian delves into Khayyam's impact on both Eastern and Western cultures, illustrating how his work transcends geographical and temporal boundaries. The Rubaiyat's themes of existential inquiry, celebration of the present, and contemplation of nature's beauty resonate universally, contributing to Khayyam's enduring legacy as a poet. Meanwhile, his mathematical and astronomical achievements highlight his role as a pioneer, whose ideas paved the way for future generations of scientists and thinkers. Examining Khayyam's life and work reveals that his contributions cannot be confined to a single domain. His poetry, suffused with philosophical depth, complements his scientific rigor, offering a holistic view of a man who sought to understand the world in all its complexity. Khayyam's ability to navigate between the worlds of art and science with equal prowess is a testament to his extraordinary intellect and spirit. Teimourian's book sheds light on Khayyam as a figure who, in many ways, was ahead of his time. Challenging societal norms, questioning existential truths, and advancing scientific knowledge, Khayyam embodied the quintessential Renaissance man long before the Renaissance. His work invites readers and scholars to reconsider the boundaries between science, philosophy, and poetry, suggesting that proper understanding arises from integrating diverse realms of knowledge. Wrap Up In conclusion, Omar Khayyam's legacy is one of extraordinary breadth and depth, encompassing groundbreaking contributions to mathematics and astronomy, alongside a poetic oeuvre that continues to inspire and intrigue. Through Hazhir Teimourian's insightful analysis in Omar Khayyam: Poet, Rebel, Astronomer, readers gain a more comprehensive understanding of Khayyam's life as a testament to the power of human intellect and creativity. As we navigate the complexities of the modern world, Khayyam's work remains a beacon of enlightenment, urging us to seek knowledge, cherish the moment, and ponder the mysteries of existence with open minds and hearts. Khayyam's life and legacy serve as a powerful reminder of the enduring impact of a curious and open-minded approach to the world. All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Greg Guenthner] [Greg Guenthner, CMT,]( is chief strategist at Forge Research Group. He has spent the better part of the past two decades developing long-term and short-term strategies with a single goal in mind: to help everyday investors generate outstanding returns and control their financial futures. Greg’s charts, analysis, and insights have appeared in Marketwatch, Forbes, Yahoo Finance, and many other financial publications. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@dailyreckoning.com. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. 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