APPLE ON TRACK FOR THE WORST REVENUE DECLINE STREAK IN TWO DECADES AND INTEREST RATES RISE – MOMO CROWD DOES NOT CARE

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By Nigam Arora & Dr. Natasha Arora

To gain an edge, this is what you need to know today.

Long Yields Rise

Please click here for a chart of 20+ Year Treasury Bond ETF (TLT).

Note the following:

  • The chart shows that long bonds are falling because yields on long bonds are rising.  Bonds trade inverse to the yield.
  • The trendline on the chart shows that TLT had been making lower highs prior to the sudden drop.
  • The chart shows that TLT has now fallen below the prior support zone, which has now become the resistance zone.
  • The chart shows the next support zone.
  • RSI on the chart shows that TLT is way oversold.  An oversold condition can lead to a quick bounce, but the bounce may not be sustainable in view of the huge supply of Treasury bonds. As a member of The Arora Report, you knew in advance that this was likely to happen due to increased borrowing by the U.S.  We previously wrote:

In The Arora Report analysis, here is an important piece of new data that prudent investors should pay attention to.  The U.S. Treasury Department has announced that it plans to borrow about $1T in the third quarter.  This is the largest amount ever to be borrowed by the U.S. in any third quarter.  More importantly, the amount to be borrowed is about $200B more than the prior estimates.

  • Along with the rise in yields on U.S. government bonds, yields on government bonds across the globe are rising.
  • Traditionally when yields rise, stocks fall.  The reason is that stocks compete with bonds.  When yields rise, bonds become more attractive.
  • Since technology stocks tend to be long duration stocks, historically, they are impacted negatively more than other stocks by rising yields.  To develop an in-depth understanding of how it all works, listen to the podcast titled “Be Careful With Popular Long Duration Stocks.”  In addition to this podcast, there are several other podcasts in Arora Ambassador Club that give you in-depth knowledge on the subject.
  • Rising yields were responsible for the significant drop in technology stocks and the bear market in 2022.
  • In 2023, investor exuberance over AI became so great that investors stopped caring about the yields.  As a result, the historical relationship between stocks and bonds broke.  Will the historical relationship reassert itself?
  • Here are the key points from Apple (AAPL) earnings:
    • Apple earnings were slightly below the consensus and significantly below the whisper numbers.
    • Apple revenues declined for the third quarter in a row.
    • Apple is on track for declining revenues in this quarter.  This will make the worst revenue decline streak for Apple in two decades. 
    • iPhone sales declined.
    • On the positive side, service revenues reached an all time high of $21B.
    • Apple now has one billion customers for its services.
    • Apple sales in India hit a record.
  • Amazon (AMZN) earnings were significantly better than consensus and slightly better than the whisper numbers.
  • Both Apple and Amazon hyped AI in their conference calls.  However, considering the huge investment AI needs, neither company seems to have a clear map to profit from AI.
  • In The Arora Report analysis, right now investors are not looking ahead, and the AI frenzy is so hyped up that investors don’t even ask how these companies will profit from AI.  In due course, this will change.  
  • Stock futures fell after the release of Apple earnings along with AAPL stock.
  • Subsequently, the People’s Bank of China said that it would increase funding support for the private sector.  The statement from China, not only caused a rally in Chinese stocks, it caused a significant rally in U.S. stock futures.  Stock futures started pulling back in anticipation of the jobs report and continue to slightly pullback after the jobs report.  The jobs report is mixed.  Here are the details:
    • Non-farm private payrolls came at 172K vs. 175K consensus.
    • Headline non-farm payrolls came at 187K vs. 200K consensus.
    • Hourly earnings came at 0.4% vs. 0.3% consensus.
    • Average work week came at 34.3 vs. 34.4 consensus.
  • The foregoing illustrates the advantage of an adaptive model that changes itself with market conditions.  Most models on Wall Street are static.  They work for a while and then they stop working when market conditions change.  The highly successful ZYX Asset Allocation Model with inputs in ten categories and a long track record of hundreds of accurate calls in both bull and bear markets is an adaptive model.  Here are two examples to consider:
    • In the past, there was a time when Apple revenues declined for one quarter and the stock was cut in half.  Now, Apple is on track for declining revenues for four quarters in a row and Apple stock is up 52% this year.  
      • This is where buy zones from The Arora Report absolutely shine.
      • The chart shows the Arora buy zone which allowed members of The Arora Report to buy Apple near the lows and experience large gains.  
    • Last year, technology stocks were hit hard because interest rates were rising.  This year, nobody cares.
  • 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.
See also  GROWTH FEARS SEEPING INTO THE STOCK MARKET – NVIDIA’S RUBIN AND RATE CUT HOPE HELP THE STOCK MARKET

Magnificent Seven Money Flows

Money flows in Tesla (TSLA), Nvidia (NVDA), Amazon, and Alphabet (GOOG) are positive in the earning trade.

Money flows in Apple, Microsoft (MSFT), and Meta (META) are negative in the early trade.

Money flows in Nasdaq 100 ETF QQQ and S&P 500 ETF SPY are mixed.

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.

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 🔒 oil in the early trade.  Smart money is 🔒 in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin is range bound.

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 down, and bonds are ticking up.

The dollar is weaker.

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 $1976, silver futures are at $23.68, and oil futures are at $81.91.

S&P 500 futures are trading at 4536  as of this writing.  S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.

See also  WEEKLY STOCK MARKET DIGEST: CROSS CURRENTS IN THE STOCK MARKET INCREASING AHEAD OF FOMC MEETING

DJIA futures are up 68 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.

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.

See also  STOCK MARKET CELEBRATES COOLER CPI, OIL GLUT BY THE END OF THE DECADE

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This post was just published on ZYX Buy Change Alert.

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Picture of Nigam Arora

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.

Picture of Dr. Natasha Arora

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.

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