By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Hope Pinned On Apple Intelligence
Please click here for a chart of Apple stock (AAPL).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of AAPL stock is being used to illustrate the point.
- The chart shows when the iPhone 15 was launched.
- The chart shows the move from iPhone 15 launch to today’s iPhone 16 launch.
- Investors are hopeful that the move in AAPL stock from the iPhone 16 launch to the iPhone 17 will be much bigger compared to the stock move between the launch of iPhone 15 and iPhone 16.
- The chart shows that even though investors have stars in their eyes, for the short term, AAPL stock has traced a negative pattern.
- The chart shows that AAPL stock hit the top of the resistance zone in July.
- The chart shows that AAPL stock failed to penetrate the resistance zone.
- The chart shows that after AAPL stock failed to penetrate the resistance zone, it fell all the way to the bottom band of the support zone.
- The chart shows that AAPL stock rallied after falling to the bottom of the support zone.
- The chart shows that the rally stopped at the low band of the resistance zone.
- Investors are mostly focused on hopes that Apple Intelligence, the name for Apple’s artificial intelligence, will start a new super cycle of iPhone sales, and thus lift Apple sales from being sluggish for a long time.
- Even though there is a lot of exuberance about Apple Intelligence, prudent investors need to remember that the momo crowd focuses only on the bullish factors and ignores the negative factors. In contrast, smart money takes into account both positive and negative factors.
- There are several negative factors about Apple that the stock market is ignoring right now that prudent investors should be aware of:
- Apple intelligence will likely not be available in the European Union and China.
- Even in the U.S., most Apple Intelligence features will not be available right away.
- The launch of all Apple Intelligence features is staggered over a long period of time.
- The fact that Apple Intelligence that will initially be present in the iPhone is only half baked may delay the super cycle.
- The marketing hype about Apple Intelligence is way more than reality.
- Apple does not own its AI. Apple is licensing its AI from OpenAI.
- The model behind the AI that Apple is offering is not running on the iPhone or on Apple servers. The model appears to be running on Nvidia (NVDA) based servers owned by Microsoft (MSFT).
- Apple has been receiving $20B per year from Google (GOOG) to make Google the default search. A judge has ruled that Google is a monopolist. In due course, the government may force Google to stop paying $20B to Apple.
- In China, Apple is losing market share to Huawei.
- Many Chinese believe that Huawei phones are superior to the iPhone.
- Huawei is trying to crash Apple’s iPhone part by introducing the world’s first tri-fold phone.
- Due to geopolitics between the U.S. and China, nationalist sentiment in China is rising against the U.S. This poses a significant risk to Apple since about 20% of Apple sales come from China.
- We understand that investors are very loyal to Apple. Before sending us hate email for doing a comprehensive analysis, note that Apple is the largest position in the ZYX Buy Model Portfolio. Long time members of The Arora Report are long AAPL stock from $4.68. They are now sitting on an unrealized gain of 4620%.
- Those who own AAPL stock or are interested in AAPL stock should carefully look at where AAPL stock sits in the risk reward matrix. You can see the risk reward matrix by clicking on Model Portfolio on the main menu in ZYX Buy.
- Note that Warren Buffett has been selling AAPL stock.
- Prudent investors should also be aware that Apple can easily manipulate its stock. After the last Apple event when Apple had carefully staged to run up its stock, Apple stock started falling. Apple aggressively bought its own stock to cause a technical breakout.
- Apple is clearly anxious about today’s event, as demonstrated by the fact that this event is taking place on a Monday, whereas Apple generally does not hold major events on Mondays. Apple is trying to get ahead of a potential European Commission decision on Apple being forced to pay $14B in taxes.
- There is aggressive buying in stocks this morning due to two reasons:
- A short squeeze is occurring. The technical pattern with the stock market, especially AI stocks traced on Friday afternoon, historically leads to a selloff on Monday. When stock futures did not open much lower on Sunday night, a short squeeze started. As the night went on, the short squeeze accelerated.
- The reason stock futures did not open much lower is because Japanese yen weakened. The weakening yen has saved AI stocks from a blood bath this morning.
- The fact that a short squeeze and weakening yen saved the stock market means that prudent investors should not become complacent. Pay attention to the protection band. See the Protection Band And What To Do Now section below.
- 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. The protection band is one of the large number of unique edges that are available to members of The Arora Report.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), NVDA, MSFT, GOOG, Meta (META), and Tesla (TSLA).
In the early trade, money flows are negative in AAPL.
In the early trade, money flows are positive in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).
Momo Crowd And Smart Money In Stocks
The momo crowd is *** (To see the locked content, please take a 30 day free trial) stocks in the early trade. Smart money is *** in the early trade.
Note for new members: Smart money often sells into the strength generated by momo crowd buying and buys into the weakness generated by momo crowd selling. Over a long period of time, investors come out ahead by adopting smart money’s ways. The exception is in a raging bull market – for very short term trades, consider following the momo crowd and not smart money.
Gold
The momo crowd is *** gold in the early trade. Smart money is *** in the early trade.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is *** in oil in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is range bound. Bitcoin ETFs have seen a negative money flow of $1.2B in the last eight days. This is the longest streak of negative money flows in bitcoins ETFs.
Markets
Our very, very short-term early stock market indicator is ***. This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.
Interest rates are ticking up, and bonds are ticking down.
The dollar is stronger.
Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.
Gold futures are at $2534, silver futures are at $28.56, and oil futures are at $67.88.
S&P 500 futures are trading at 5456 as of this writing. S&P 500 futures resistance levels are 5500, 5622, and 5748: support levels are 5400, 5256, and 5210.
DJIA futures are up 296 points.
Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding *** in cash or Treasury bills or allocated to short-term tactical trades; and short to medium-term hedges of ***, and short term hedges of ***. This is a good way to protect yourself and participate in the upside at the same time.
You can determine your protection bands by adding cash to hedges. The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive. If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.
A protection band of 0% would be very bullish and would indicate full investment with 0% in cash. A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.
Traditional 60/40 Portfolio
Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.
Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less. Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.
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Nigam Arora
Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.
Dr. Natasha Arora
Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.
