By Nigam Arora
To gain an edge, this is what you need to know today.
More Memory Supply
Please click here for a chart of Micron stock (MU).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of MU stock is being used to illustrate the point. Prudent investors need to keep an eye on MU stock because lately MU stock has been leading the semiconductor mania.
- The chart shows MU stock has moved up into zone 1 (resistance) after reporting earnings.
- If MU breaks above zone 1 shown on the chart, $1500 is the next magnet. The momo crowd is shooting for $2000. Members of The Arora Report are long MU from an average of $21.77. MU is trading at $1233.78 as of this writing in the premarket, representing a gain of 5567%.
- Micron earnings were a blowout, exceeding the whisper numbers. Whisper numbers had moved up going into earnings.
- Micron earnings are reigniting AI optimism. This morning, there is aggressive buying in the AI trade. The bullishness is spilling into the rest of the stock market.
- The most important point from Micron’s earnings is that Micron has struck 16 long term deals to lock in pricing and volume. If Micron and its competitors are able to accelerate this trend, it will be a structural shift. This structural shift will smooth out historic boom bust cycles in memory. The result may be a higher PE for Micron.
- Markets always have crosscurrents. In the middle of the good news of a structural shift in the memory business and uber bullishness this morning, prudent investors need to remember that in The Arora Report analysis more memory supply is coming online. Micron itself had a capex of $7.1B in Q3. Micron plans a capex of $10B in Q4 and $27B in FY27. A vast majority of this capex is going to increase supply.
- So far, the momo crowd is oblivious to the potential increase in memory supply.
- Apple (AAPL) is announcing significant price hikes due to higher memory prices. It will be interesting to see if consumers easily absorb the price increases or if it results in reduced demand.
- Also on the positive side, Qualcomm (QCOM) raised its FY29 non-handset revenue projection to $40B. This is a big jump. Historically, many have considered Qualcomm as a handset technology and chip provider. QCOM is in the ZYX Buy Core Model Portfolio, long from an average of $47.13. QCOM is trading at $216.38 as of this writing in the premarket, representing a gain of 359%.
- In a major development for the semiconductor industry, International Business Machines (IBM) is unveiling the world’s first sub-1nm chip technology using transistor architecture at 0.7nm. When commercialized this will be a major leap in semiconductor manufacturing. As a reference, compared to IBM’s 2nm node chips, the new technology provides up to 70% better energy efficiency and 50% more performance.
- PCE is the Fed’s favorite inflation gauge. Inflation came inline. Here are the details:
- Headline PCE came at 0.4% vs. 0.4% consensus.
- Core PCE came at 0.3% vs. 0.3% consensus.
- The U.S. economy is 70% consumer based. For this reason, prudent investors pay attention to personal income and personal spending. The data shows the consumer is strong as they borrow more and deplete their savings. Here are the details:
- Personal spending came at 0.7% vs. 0.3% consensus.
- Personal income came at 0.7% vs. 0.3% consensus.
- GDP data is strong. Here are the details:
- Q1 GDP third estimate came at 2.1% vs. 1.6% consensus.
- Q1 GDP Deflator third estimate came at 3.6% vs. 3.5% consensus.
- Durable goods data is mixed. Here are the details:
- Durable Goods Orders came at -4.5% vs. -3.2% consensus.
- Durable Goods Orders Ex-Transportation came at 1.3% vs. 0.5% consensus.
- Initial jobless claims came at 215K vs. 225K consensus.
- In The Arora Report analysis, the foregoing data shows the economy is resilient with sticky underlying inflation. Retreating oil prices will help. If the future data comes similar to the foregoing, in spite of President Trump’s wishes for lower interest rates, the Fed may have no choice but to raise interest rates. Prudent investors should note the stock market is not prepared for potential higher interest rates.
- Consider getting ahead of the curve and remember that in spite of this morning’s uber bullishness, quarter end rebalancing is ahead. As we have previously shared with you, in The Arora Report analysis, over $100B worth of equities will be sold in quarter end rebalancing.
- 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
Most portfolios are now heavily concentrated in the Mag 7 stocks. For this reason, to get ahead and get an edge, investors need to dig below the surface of the Mag 7 stocks. It is equally important to rise above the noise of daily news on the Mag 7 stocks. The best way to get an edge, dig below the surface, and rise above the noise of the daily news is to pay attention to early money flows in the Mag 7 stocks on a daily basis. When there is significant news in the Mag 7 stocks that rises above the threshold of noise and impacts your entire portfolio, it is covered in the main section above.
In the early trade, money flows are positive in Nvidia (NVDA) and Tesla (TSLA).
In the early trade, money flows are negative in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and 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) buying 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
The momo crowd is *** gold in the early trade. This is reflected in gold ETF (GLD), silver ETF (SLV), gold miner ETF (GDX), and silver miner ETF (SIL). Smart money is *** in the early trade.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is *** 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.
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.
