By Nigam Arora
To gain an edge, this is what you need to know today.
Cooler PPI
Please click here for a chart of ASML stock (ASML).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of ASML is being used to illustrate the point.
- ASML is important because ASML is the undisputed leader in extreme ultraviolet lithography machines. Without ASML’s machines, none of the advanced AI chips could have been manufactured.
- The chart shows ASML stock gapping up on earnings.
- The chart shows that even after the earnings gap up, ASML is still below zone 1 (resistance).
- The chart shows ASML is comfortably above zone 2 (support).
- The ASML earnings report is outstanding. Here are the details:
- ASML reported Q2 EPS of EUR 7.58 vs. EUR 6.91 consensus.
- Revenue came at EUR 9.33B vs. EUR 10.23B consensus.
- ASML guides Q3 revenue of EUR 11.0 – 12.0B vs. EUR 10.43B consensus.
- ASML guides FY26 revenue of EUR 43B – 45B vs. EUR 39.82B consensus.
- In The Arora Report analysis, ASML can be a tell for semiconductors and, in turn, the entire stock market if it breaks above zone 1 or below zone 2.
- ASML earnings are bringing optimism and buying in the AI trade in the premarket.
- Yesterday, we shared with you that the Consumer Price Index (CPI) came at -0.4% vs. -0.1% consensus. Prudent investors should note that not even one of the 57 economists who contributed to the consensus was even close to being correct. This underscores the importance of staying humble. Follow Arora’s Second Law of Investing and Trading, which states, “Nobody knows with certainty what is going to happen next in the markets.”
- Producer Price Index (PPI) came cooler than expected. Here are the details:
- PPI came at -0.3% vs. 0.1% consensus.
- Core PPI came at 0.2% vs. 0.4% consensus.
- Of note, prior PPI has been revised to 0.6% from 1.1%. 1.1% was a four year high.
- Just like CPI, economists were wrong on PPI.
- The Fed’s Beige Book will be released at 2pm ET.
- The U.S. continues to attack Iran. Iran continues to retaliate. In The Arora Report analysis, Iran is taking advantage of President Trump’s constraints due to the upcoming midterm elections. Oil is not spiking as traders are believing in TACO (Trump Always Chickens Out).
- 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 Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Meta (META), and Tesla (TSLA).
In the early trade, money flows are negative in Alphabet (GOOG) and Nvidia (NVDA).
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. 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
Lower PPI is driving buying in 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
API crude inventories came at a draw of 0.056M barrels vs. a consensus of a draw of 2.7M barrels.
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 buying.
Markets
Interest rates are ticking down, and bonds are ticking up.
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 7611 as of this writing. S&P 500 futures resistance levels are 7700, 7900, and 8000 : support levels are 7318, 7194, and 7032.
DJIA futures are up 126 points.
Gold futures are at $4071, silver futures are at $58.81, and oil futures are at $79.69.
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.
