By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
AI CapEx
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows that QQQ is gapping up above its Liberation Day level.
- The chart shows QQQ is now approaching the resistance zone.
- RSI on the chart shows that QQQ is overbought but can become more overbought if there are more good tech earnings, such as those from Amazon (AMZN) after the close.
- The gap up in QQQ is primarily driven by good earnings from Microsoft (MSFT) and Meta (META). Both Microsoft and Metea reported earnings better than the consensus and better than whisper numbers. Both Microsoft and Meta are benefiting from AI.
- On April 9, the Arora Report published a list of the top nine stocks to buy. MSFT stock was on the list and trading around $380 at that time. MSFT is trading at $432 as of this writing in the premarket.
- For the AI trade, prudent investors should pay careful attention to capital spend.
- Microsoft capital expenditures for the quarter came at $16.7B vs. $16.2B consensus, which was higher than $11B capex from a year ago. Capital expenditure expectations for the year are unchanged.
- Meta is increasing the high end of its capital expenditure for the year by 11% to $72B.
- Nvidia (NVDA) stock is running up this morning due to the foregoing capital spend numbers from Microsoft and Meta.
- Rising consumer angst caused McDonald’s sales in the U.S. to fall the most since the 2020 pandemic. Same store sales in the U.S. fell by 3.6%.
- Adding to the positive sentiment this morning is that China appears to be open to trade talks. The positive indication from China is coming after the U.S. reportedly took the initiative to contact China to open trade negotiations.
- Wall Street is front running blind money this morning – stocks are being bought in hopes of selling them to blind money later today. Blind money is the money that flows into the stock market on the first two days of the month without any analysis irrespective of market conditions. Blind money is typically invested in the afternoon.
- Initial jobless claims came at 241K vs. 225K consensus. The market did not expect this rise in jobless claims, but as a member of The Arora Report, you knew this rise was coming. Jobless claims is a leading indicator. The market is mostly focused on lagging indicators. The Arora Report systems are based on leading indicators.
- Going forward, investors need to remember that employment is like a shoulder – it slowly declines and then rapidly falls off. When employment falls off, this is an early indication of a potential impending recession.
- At this time in The Arora Report analysis, the probability of a recession is 40% and rising.
- In The Arora Report analysis, the biggest risk for investors continues to be potential stagflation.
- ISM Manufacturing Index will be released at 10am ET and may be market moving.
- The jobs report, the mother of all numbers, will be released tomorrow at 8:30am ET.
- As an actionable item, the sum total of the foregoing is in the Arora Protection Band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the Arora Protection Band. The Arora 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), Alphabet (GOOG), Microsoft (MSFT), Meta (META), Tesla (TSLA), and Nvidia (NVDA).
In the early trade, money flows are negative in Apple (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. Smart money is an important indicator but is only one of hundreds of indicators that go into determining the Arora Protection Band and signals. Please click here and here to understand how signals are generated.
Very Very Short-Term Indicator
The Arora Report’s proprietary 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.
Gold
Gold is falling on good tech earnings. Good tech earnings indicate less need for gold as a safe haven.
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
Oil is weak on Saudi Arabia indicating that it can live with lower oil prices.
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 seeing buying. $100K is the next magnet.
Markets
Interest rates are ticking down, and bonds are ticking up.
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.
S&P 500 futures are trading at 5642 as of this writing. S&P 500 futures resistance levels are 5748, 5926, and 6017: support levels are 5622, 5500, and 5400.
DJIA futures are up 177 points.
Gold futures are at $3234, silver futures are at $32.58, and oil futures are at $57.56.
Arora Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror. The proprietary Arora Protection Band from The Arora Report is very popular. The Arora Protection Band puts all of the data, all of the indicators, all of the news, all of the crosscurrents, all of the models, and all of the analysis in an analytical framework that is easily actionable by investors.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding *** in cash, Treasury bills, short term fixed income, 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.
