By Nigam Arora
To gain an edge, this is what you need to know today.
Semi Mania Takes A Breather
Please click here for a chart of leveraged semiconductor ETF (SOXL).
Note the following:
- The chart shows the largest red candle yesterday since the semi mania started that led to a 366% gain to the peak from March 30.
- The chart shows that in the early trade today semiconductors continue to sell off.
- RSI on the chart shows semiconductors have lost internal momentum, but RSI is at a point where the semi mania can easily reignite.
- The big red candle shown on the chart was triggered by the following:
- An ex-Samsung executive in South Korea said China was ramping up memory production. In The Arora Report analysis, memory is easier to make than advanced AI chips and production from China can potentially cause memory prices to collapse.
- Seagate (STX), a disk drive maker, said it would take too long to buy new machines and build new factories. In The Arora Report analysis, the Seagate statement implies Seagate does not see demand continuing at this rate beyond two to three years.
- As a member of The Arora Report, you have been ahead of the curve. We previously shared with you that in The Arora Report analysis the demand for semiconductors will slow in 2028. Markets typically look 6 – 12 months ahead and sometimes 18 months ahead. We also previously shared with you that a great short selling opportunity may be ahead. It is important to reemphasize short selling takes experience and practice. Just like an athlete practices before an event, if you are interested in the upcoming opportunity, you need to begin training now. The best way to train is to be a member of ZYX Short – consider initially not taking any signals, simply follow and learn.
- Nvidia (NVDA) will report earnings after the market close tomorrow. Nvidia can easily reignite the semi mania. On the other hand, if Nvidia disappoints, semiconductors can see a steep sell off.
- Even after the pullback, members of The Arora Report have very large gains on semiconductors. Examples include 6770% gain on semiconductor ETF (SMH), 3031% gain on memory maker Micron (MU), 2485% gain on semiconductor equipment maker Applied Materials (AMAT), and 1671% gain on NVDA. Other notable semiconductor positions with great gains are Texas Instruments (TXN), Analog Devices (ADI), NXP Semiconductors (NXPI), and Qualcomm (QCOM). There is merit to hedging and/or taking partial profits on semiconductor positions. Here is the key question: Is it better to hedge and/or take partial profits today or is it better to wait until after Nvidia earnings? The answer is to do some today and wait for Nvidia earnings to do more.
- In addition to Nvidia earnings, we will be paying careful attention to the following:
- Announcement of a massive buyback
- Nvidia positioning against Google (GOOG, GOOGL) TPU and other custom silicons
- Timing of Vera Rubin, the next generation AI chips
- Home Depot (HD) is the largest home improvement retailer. This is the reason Home Depot earnings matter. Home Depot reported earnings better than consensus but slightly less than whisper numbers. EPS came at $3.43 vs. $3.41 consensus. Revenue came at $41.77B vs. $41.51B consensus. The company sees FY26 revenue up 2.5% – 4.5% and EPS up 4% from $14.69 vs. $15.04 consensus.
- President Trump has bought more time to solve the thorny Iran problem by saying that on request from Middle East leaders he postponed a massive attack on Iran that was scheduled for today. Immediately after President Trump’s statement, stocks rallied, oil fell, and yields retreated.
- 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 Alphabet (GOOG) and Microsoft (MSFT).
In the early trade, money flows are negative in Apple (AAPL), Amazon (AMZN), Meta (META), Nvidia (NVDA), and Tesla (TSLA).
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 *** stocks 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 *** but can quickly turn based on news or rumors about Nvidia or Iran. 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 *** 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.
Markets
Interest rates and bonds are range bound.
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 7402 as of this writing. S&P 500 futures resistance levels are 7500, 7700, and 7900 : support levels are 7200, 7000, and 6780.
DJIA futures are down 73 points.
Gold futures are at $4541, silver futures are at $76.40, and oil futures are at $103.51.
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.
