By Nigam Arora
To gain an edge, this is what you need to know today.
AMD To Benefit
Please click here for a chart of Advanced Micro Devices stock (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 AMD has rallied from a low of $402.10 to $570.80 as of this writing in the premarket, reaching the low band of zone 1 (resistance).
- The chart shows when Arora buy signals were given for the trade around position on AMD. A trade around position is a technique used by hedge funds to dramatically increase profits while reducing risks.
- The chart shows the Arora signal this morning to take profits and exit the AMD trade around position. The reason is AMD reaching the low band of the resistance zone.
- The chart shows Arora buy zones for the AMD core position. AMD is in ZYX Buy in the portfolio that surrounds the Core Model Portfolio. AMD is long from an average of $205.52, representing a gain of 178%.
- Nvidia’s troubles are creating an opportunity for AMD. Large AI customers have relied heavily on Nvidia, but uncertainty surrounding its leadership may prompt them to look more seriously at AMD.
- AMD is better positioned than it was a year ago. Meta (META) has installed AMD Helios systems, and AMD says OpenAI, Anthropic, Microsoft (MSFT), and Oracle (ORCL) are running workloads on Helios.
- AMD’s data center revenue jumped 97% year-over-year in the latest quarter.
- AMD is becoming more competitive on performance. In tests announced November 12, AMD reported up to 30% higher inference throughput per GPU than Nvidia’s Vera Rubin on a specific DeepSeek-R1 benchmark.
- CUDA remains a major Nvidia advantage. AMD is improving its ROCm software and working with Anthropic to use Claude to accelerate software development and optimize workloads for AMD GPUs.
- Previously, moving away from CUDA required extensive manual work by skilled engineers. AI coding tools can now handle much of the code conversion and help identify compatibility issues. Testing and optimization are still necessary, but migration is becoming easier and less expensive. This could gradually weaken Nvidia’s software advantage.
- Even customers that remain loyal to Nvidia may buy more AMD chips to reduce dependence on one supplier and negotiate better prices.
- The tentative plan is to start a new AMD trade around position either on a substantial pullback or a decisive breakout above zone 1 shown on the chart. Note, trade around positions are separate and distinct from core positions.
- The plan is to continue to hold the core AMD position.
- The momo crowd bought NVDA stock extremely aggressively yesterday. Aggressive NVDA buying continued after hours yesterday and is continuing in the premarket today.
- Prudent investors should note that while momo crowd money flows are positive in NVDA, smart money flows are negative.
- The momo crowd is buying NVDA stock because the long bull market has conditioned them to buy every dip. As usual, the momo crowd is not doing deep 360 degree analysis of Nvidia’s future but is latching onto a simple narrative of low forward PE. The point the momo crowd is missing is that the forward earnings estimates are at risk without the visionary leadership of Jensen Huang and are also at risk due to the potential restrictions on exports to China and increasing competition. As an example of competition, Cerebras (CBRS) announced a deal with Microsoft yesterday. Cerebras already has deals with Amazon (AMZN) and Oracle.
- Of special note is a report that Nvidia is already planning to slow down deals it has been making to finance the AI industry. A slow down in financing from Nvidia has major negative implications for the AI trade.
- Smart money continues to sell NVDA stock into the strength. For the reasons, please see yesterday’s Morning Capsule.
- Applied Materials (AMAT), one of the largest manufacturers of semiconductor equipment, announced earnings better than consensus and whisper numbers. Yet, AMAT stock is being sold on concerns that down the road, Huang leaving Nvidia may result in lower demand for semiconductors than previously anticipated.
- Prudent investors should note AMAT is a leading indicator of future semiconductor demand. AMAT is in the ZYX Buy Core Model Portfolio, long from an average of $16. It is trading at $378.88 as of this writing in the premarket, representing a 2268% gain.
- Producer Price Index (PPI) came cooler than expected. Cooler PPI has trigger buying in stocks, bonds, gold, silver, and bitcoin. However, prudent investors should note that on a year-over-year basis, Core PPI is up 4.9%. The Fed’s target is 2% inflation based on PCE. Here are the details:
- Headline PPI came at 0.3% vs. 0.4% consensus.
- Core PPI came at 0.3% vs. 0.3% consensus.
- In The Arora Report analysis, in spite of cooler PPI data, the probability of the Fed raising interest rates in December is 80%.
- 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 Amazon (AMZN), Nvidia (NVDA), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).
In the early trade, money flows are negative in Microsoft (MSFT).
In the early trade, money flows are positive in S&P 500 ETF (SPY) and neutral 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 continues to trade below $3900 but is seeing buying after PPI release.
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 *** 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 selling and is now under $70K.
Markets
Interest rates are ticking up, and bonds are ticking down.
The dollar is range bound.
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 7647 as of this writing. S&P 500 futures resistance levels are 7733, 7795, and 7831 : support levels are 7626, 7541, and 7318.
DJIA futures are up 192 points.
Gold futures are at $3885, silver futures are at $49.60, and oil futures are at $89.15.
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.
