By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Extreme Positive Sentiment
Please click here for a chart of Home Depot stock (HD).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of HD stock is being used to illustrate the point.
- Home Depot is important because it is the largest retailer of home improvement goods in the country. Home Depot earnings reflect the state of housing and consumer sentiment.
- The chart shows the price action on earnings release in the premarket this morning.
- The chart shows HD stock is still below the high reached last year.
- Home Depot earnings and guidance are mostly inline with whisper numbers. In The Arora Report analysis, it is worth noting that the trend has improved throughout the quarter. July was the best month of the year so far with comps up 3.3%. Improving trends appear to be due to lower interest rates and consumers’ increasing willingness to spend on their homes. Earnings also showed consumers are mostly undertaking small projects and foregoing large projects.
- Luxury home builder Toll Brothers (TOL) is scheduled to report earnings after market today.
- In surprise news, SoftBank (SFTBY) of Japan is buying $2B worth of Intel (INTC) stock. INTC stock is jumping as this is seen as a vote of confidence. The U.S. government is considering taking about a 10% stake in Intel. In The Arora Report analysis, this is a negative as Intel was supposed to get about $10.9B of CHIPS Act funds for free, but now Intel may have to give up a 10% stake instead.
- Investors were encouraged by the positive signals coming from yesterday’s meeting between President Trump, President Zelenskyy, and European leaders. The big change is that President Trump is now open to the U.S. participating in security guarantees for Ukraine after shying from them.
- Treasury Secretary Scott Bessent plans to raise his estimate of the amount of tariff revenue to be collected to be above $300B. The stock market is taking this as a positive.
- We have been sharing with you that sentiment in the stock market is extremely positive. The Home Depot trend and housing data (see section below) are adding more fuel to the already extremely positive sentiment.
- 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.
Housing Starts
The just released data came stronger than expected. Here are the details:
- Housing starts came at 1.428M vs. 1.311M consensus.
- Building permits came at 1.354M vs. 1.39M consensus.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Nvidia (NVDA) and Tesla (TSLA).
In the early trade, money flows are neutral in Apple (AAPL) and Microsoft (MSFT).
In the early trade, money flows are negative in Amazon (AMZN), Alphabet (GOOG), and Meta (META).
In the early trade, money flows are neutral in S&P 500 ETF (SPY) and negative in 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
The momo crowd is *** 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 *** oil 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 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 6463 as of this writing. S&P 500 futures resistance levels are 6500, 6700, and 7000: support levels are 6256, 6131, and 6017.
DJIA futures are up 99 points.
Gold futures are at $3379, silver futures are at $38.09, and oil futures are at $61.91.
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.
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.
