By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Strong ADP Data
Please click here for a chart of Advanced Micro Devices (AMD).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of AMD stock is being used to illustrate the point.
- The chart shows the momo crowd buying AMD stock yesterday ahead of the earnings release.
- The chart shows when earnings were released.
- The chart shows the drop in AMD stock after earnings.
- The chart shows the proprietary Arora Report VUD indicator changed to orange when earnings were released and continues to be orange today in the premarket. This indicates a net supply of AMD stock.
- AMD reported earnings inline with the consensus and provided decent guidance. Why did the stock fall? The reason is that the whisper numbers for AI GPU guidance were approaching $6B. AMD guided above $5B for 2024 – this was inline with consensus. As we have been sharing with you, stocks move based on the difference between reported numbers and whisper numbers.
- The reason that AMD was not able to meet the whisper numbers is that even though AMD chips for AI are excellent, AMD does not have the software and the whole system like Nvidia (NVDA). This limits AMD’s market even though AMD is offering cheaper price points compared to Nvidia. AMD has recently bought a systems company in an attempt to catch up to NVDA. However, in The Arora Report analysis, it will take a long time for AMD to catch up with NVDA. Nvidia’s CUDA is a parallel computing platform and programming model. Thousands of developers have been using CUDA to harness the power of AI for years.
- Alphabet (GOOG, GOOGL) reported earnings yesterday after the close. Alphabet earnings show data center growth. Data center growth means AI growth. However, in The Arora Report analysis, there is risk in GOOG stock because Google has over 90% of the search market. It is hard to see Google gaining share from here. Even a drop of a few percentage points will substantially hit earnings.
- Those who want to develop a deeper understanding of investing in AI may consider listening to the podcasts in Arora Ambassador Club.
- Microsoft (MSFT) and Meta (META) earnings are ahead after the close. In The Arora Report analysis, stocks will move based not only on the earnings but how well the companies are able to monetize AI.
- The Arora Report was one of the first to call that AI was real and a fortune was to be made from AI. We have also been sharing with you that it is important to develop deep knowledge because at times it will be treacherous. We have illustrated the treacherousness of following the momo crowd in AI with the example of Super Micro Computer (SMCI). When everyone was bullish and SMCI was trading above $120, The Arora Report call was that SMCI was worth only $44 – $48 at best. SMCI is falling about 33% to about $32 as of this writing in the premarket on the news that its independent auditor resigned.
- Just released GDP data shows that the economy is strong even though the numbers are less than the consensus. GDP is a lagging indicator. The Arora Report system focuses on leading indicators. Here are the details of the GDP data:
- Q3 GDP-Adv came at 2.8% vs. 3.0% consensus.
- Q3 Chain Deflator-Adv came at 1.8% vs. 2.3% consensus.
- The ADP data indicates a strong jobs picture. ADP is the largest payroll processor in the country and uses its data to give an advanced glimpse of the jobs picture ahead of the official jobs report that will be released on Friday at 8:30am ET. In The Arora Report analysis, if the official jobs report also shows a strong jobs picture, it will decrease the probability that the Fed will cut interest rates at the next meeting.
- ADP employment change came at 223K vs. 105K consensus.
- ADP data is one more data point that has gone against the reason the Fed gave to cut interest rates by 50 bps in September. As we have been writing, almost all of the data has gone against the Fed’s reasoning for cutting rates by 50 bps.
- In a major setback, Eli Lilly (LLY) missed the earnings consensus. LLY stock has fallen about 10% as of this writing in the premarket. In sympathy, the stock of Novo Nordisk (NVO) is also falling. LLY and NVO stocks have been riding high on weight loss drugs. LLY stock is in the ZYX Buy Core Model Portfolio, long from $318.45. As of this writing, LLY stock is trading at $807.
- Jobless claims, personal income and spending, and Fed’s favorite inflation gauge PCE will all be released tomorrow at 8:30am ET.
- 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), MSFT, GOOG, and META.
In the early trade, money flows are negative in Apple (AAPL), Tesla (TSLA), and NVDA.
In the early trade, money flows are negative 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.
Very Very Short-Term Indicator
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.
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
API crude inventories came at a draw of 0.573M barrels vs. a consensus of a build of 2.3M barrels.
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.
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 5866 as of this writing. S&P 500 futures resistance levels are 5926 and 6017: support levels are 5748, 5622, and 5500.
DJIA futures are down 51 points.
Gold futures are at $2799, silver futures are at $34.23, and oil futures are at $68.25.
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, 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.