By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Against Prevailing Wisdom
Please click here for a chart of Microsoft stock (MSFT).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of MSFT stock is being used to illustrate the point.
- The chart shows that after touching the low band of the support zone, MSFT stock has moved up in a straight line.
- The chart shows the move up in the early trade on three announcements:
- Microsoft is announcing a new $60B stock buyback program. This matches the largest buyback program ever from Microsoft.
- Microsoft is increasing the dividend by 10%.
- Microsoft is introducing more AI features in Office 365 and a new collaborative tool named Copilot Pages. This new tool allows users to collaborate and edit data taken from Copilot on a single page. The company is also introducing a new agent builder allowing users to build AI powered agents.
- Microsoft is in the ZYX Buy Core Model Portfolio. The Arora Report has just issued a new buy zone.
- Investors are seeing the news from Amazon (AMZN) as return to normalcy after the pandemic – Amazon will require workers to be at the office five days a week.
- The stock market is running as Wall Street positions for a 50 bps rate cut. 50 bps rate cut has now become the prevailing wisdom.
- Prudent investors closely watch retail sales data as the U.S. economy is 70% consumer based. In The Arora Report analysis, the data just released is very important because it is the last piece of economic data that the FOMC is going to see before making its rate decision tomorrow. In The Arora Report analysis, the just released retail sales data does not support a 50 bps cut. Here is the latest retail sales data.
- Headline retail sales came at 0.1% vs. -0.2% consensus.
- Retail sales ex-auto came at 0.1% vs. 0.2% consensus.
- Prior retail sales were revised to 1.1% from 1.0%.
- 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 AMZN, MSFT, Alphabet (GOOG), Meta (META), Nvidia (NVDA), and Tesla (TSLA).
In the early trade, money flows are negative in Apple (AAPL).
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.
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
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
Trump has released details of his crypto project. The project is called World Liberty Financial. 63% of the coins will be bought by the public, 20% will be owned by the founding team, and 17% will be for user rewards.
The release of Trump’s crypto project details is bringing in buying in all cryptos, including bitcoin (BTC.USD).
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 and bonds are range bound.
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.
Gold futures are at $2602, silver futures are at $31.10, and oil futures are at $70.22.
S&P 500 futures are trading at 5724 as of this writing. S&P 500 futures resistance levels are 5748 and 5926: support levels are 5622, 5500, and 5400.
DJIA futures are up 125 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.
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.
