Market Radar 24. July 2023


This week, new quarterly figures from Meta Platforms and Microsoft are coming: Bright prospects for the future are guaranteed – what does the stock market make of them?

The ETFs for the Nasdaq 100 (QQQ), for the Russell 1000 Growth (IMF) and for IPO stocks (IPO) indicate an entry signal for a swing long trade for this Monday. All three ETFs reached a new intermediate high last Wednesday and then corrected on Thursday and Friday. This means that stocks from growth sectors such as the Internet, software and technology currently offer more of an opportunity for a swing trade on the long side than stocks from defensive sectors such as healthcare (XLV), consumer staples (XLP) or utilities (XLU), which in turn were at the top of the stock market’s buy list on Thursday and Friday and are now close to possible intermediate highs.

In a healthy bull market, in which practically everything can be bought following the trend, such a rotation between risk-on and risk-off industries usually takes place in such a way that a correction is implemented almost mechanically like a repurchase opportunity – both for risk-on and risk-off industries. And because risk-on stocks have corrected in the last two trading days, stock market investors are now looking for their opportunity for additional purchases or short swing trades right there.

It is therefore quite possible that the highs of Wednesday, July 19, can be restarted this trading week in the QQQ ETF, IMF ETF and IPO ETF. However, if the Wednesday highs are not exceeded by Friday, then a longer correction phase for stocks from the technology sector could be announced, according to chart technology.

In this case, the surprising comeback of gold mining stocks, which the market radar observed last week, could lead to a new run on stocks that appear to be protected from inflation.
But fundamentally, a share from the gold mining sector poured water on the embers on Thursday. More about that below.

A prolonged correction in technology stocks is still more of a fear than a reality.
A comeback in gold mining stocks is still more of a wish than a reality.
The market radar follows reality, so technology stocks should go up and gold mining stocks should go down, right?


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What do we see under the radar of the major US stock indices?

In the next two trading weeks, many U.S. stocks will present new quarterly figures. These include some semiconductor, software and internet stocks from the Nasdaq 100 such as Alphabet (GOOGL), Intel (INTC), KLA Corp. (KLAC), Lam Research (LRCX), Meta Platforms (META), Microsoft (MSFT), Qualcomm (QCOM), Texas Instruments (TXN).

The brave could take advantage of the recent correction in some of these stocks to take advantage of the strong long-term growth prospects on the earnings day of these companies with early long entries – provided that market participants reward them and do not take profits according to “sell-on-good news”.

Let’s take a closer look at two stocks from the Nasdaq 100 that will soon report new quarterly results: Meta Platforms and Microsoft.
Meta Platforms

Meta Platforms (META; Market capitalization $775 billion) lost nearly 7% in value on Thursday and Friday after hitting a new interim high on Wednesday. Does this price decline now come at the right time for a repurchase? Meta Platforms will publish new quarterly figures next Wednesday, July 26, after hours.

Last Tuesday, July 18, Meta Platforms unveiled its new Llama 2 language model for widespread use. On the one hand, Llama 2 is intended to compete with Microsoft’s Bing’s ChatGPT or Alphabet’s Google’s Bard, but at the same time it is also intended to promote the further development of chat search engines in general. And more powerful than is possible for ChatGPT or Bard.

That sounds like a clever move by Marc Zuckerberg, after he recently launched the short message app Threads, a competitor to Twitter. What could this new move do?

In contrast to ChatGPT and Bard, the program code of Llama 2 is generally accessible, which should not only accelerate the development and learning curve of chat AIs, but also promote market share. Users can tailor the language model of Llama 2 to their needs or develop their own services with the support of Meta Platforms, in the profit development of which Meta Platforms should then participate. In addition, Llama 2 could also be integrated into smartphones and not just put into operation in the cloud or on servers.
Meta Platforms also wants to make money by selling AI chatbots for Instagram or WhatsApp. It sounds surprising that Microsoft, of all companies, is supposed to help with commercialization.

Marc Zuckerberg and Microsoft CEO Satya Nadella jointly disseminated the news of a joint venture last Tuesday, July 18, both via Instagram and the new Threads app, in order to be able to grow Llama 2 quickly. Meta Platforms will cover the cost of training the models. As a cloud provider, Microsoft hosts the tools and provides the computing power for their execution, which should also be possible via the Windows operating system. 

Both Zuckerberg and Nadella see a common commitment in the Llama 2 project: namely, democratization in communication with AI. No one should be excluded. Anyone can contribute.
Llama 2 is to be adapted specifically for the Windows operating system. It would be conceivable for Windows users to generate new cooking recipes via AI via ChatGPT via Bing, and then personalize them via Instagram or WhatsApp using Llama 2 on the smartphone, so that the recipe search immediately finds the right addressee or the desired community.

Too many cooks spoil the broth? Zuckerberg and Nadella wave it off: no, no – only together does the AI application taste really good.
Let’s wait and see what the AI says about it

Microsoft (MSFT; Market capitalization: $2.5 trillion) also lost ground in the last two trading days – as well as Meta Platforms – about 7% in value. As with Meta, the reason is due to today’s rebalancing in the Nasdaq 100 index. In the run-up to two trading days, investors who want to track the Nasdaq 100 – as if they had agreed – took the high weighting of these stocks as an opportunity to push both stocks down about 7% so that the weighting in the Nasdaq 100 index was also in the right balance today, Monday. Well, the stock market can sometimes be that simple. There is an announced rebalancing and everyone knows what and how much of the shares can now be bought or sold. This is not a conspiracy theory, just a simple multiplication table.