By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
No Landing
Please click here for a chart of American Express stock (AXP).
Please click here for a chart of Nvidia stock (NVDA).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The charts of AXP and NVDA stocks are being used to illustrate the point.
- American Express CEO Stephen Squeri said that he sees “no landing” for the U.S. economy. In plain English, no landing means the economy continues to grow without a major slowdown. American Express has about 55M cardholders in the U.S. Spending on these cards provides a good data point.
- American Express CEO’s statement is another data point showing that the Fed spiked the punch with the 50 bps interest rate cut.
- The AXP chart shows a strong trendline.
- The AXP chart shows an RSI divergence. In plain English this means that as the price has moved higher, RSI is showing lower peaks. This indicates a lack of internal momentum. RSI divergence often leads to a pullback.
- AXP reported earnings better than the consensus but less than whisper numbers.
- The AXP chart shows that after spiking higher, AXP stock is pulling back.
- In the big picture, the data points from American Express earnings are important because they reflect 55M affluent consumers.
- The NVDA chart shows that NVDA stock moved higher in the resistance zone after blowout earnings from Taiwan Semiconductor (TSM). TSM manufactures Nvidia’s AI chips. TSM indicated the demand for AI chips is strong.
- The NVDA chart shows the resistance proved to be too strong for NVDA stock to breakout yesterday.
- Prudent investors should carefully watch to see if NVDA stock breaks out above the resistance zone. If NVDA breaks out above the resistance zone, it would be positive for the entire stock market, especially AI stocks. On the other hand, if this NVDA rally fails, it will be a negative for the entire stock market.
- 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.
Housing Starts
Housing starts came roughly in line but building permits dropped. Building permits are a leading indicator. Investors should focus on leading indicators. Here are the details:
- Housing starts came at 1.354M vs. 1.350M consensus.
- Building permits came at 1.428M vs. 1.455M consensus.
China
China Q3 GDP came at 0.9% quarter-over-quarter vs. 1.0% consensus.
In The Arora Report analysis, even though China’s GDP is slightly weaker than expected, it is not of concern because GDP is a lagging indicator. New stimulus measures that we have been writing about are designed to lift GDP going forward.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Alphabet (GOOG), Meta (META), Apple (AAPL), and NVDA.
In the early trade, money flows are neutral in Microsoft (MSFT),
In the early trade, money flows are negative in Tesla (TSLA),
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.
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 *** in gold in the early trade. Smart money is *** in the early trade.
For longer-term, please see gold and silver ratings.
Oil
Oil is seeing selling on the killing of Hamas leader Yahya Sinwar.
The momo crowd is *** 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 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.
S&P 500 futures are trading at 5900 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 77 points.
Gold futures are at $2722, silver futures are at $32.44, and oil futures are at $69.76.
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.