By Nigam Arora
To gain an edge, this is what you need to know today.
Treacherous Side Of The AI Trade
Please click here for a chart of Intel stock (INTC).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of INTC stock is being used to illustrate the point.
- The chart shows INTC shares are gapping down after earnings.
- The chart shows INTC’s high is $142.35. INTC is trading at $69.33 as of this writing in the premarket.
- The chart shows the Arora call to take partial profits on the core position at $130.53. The core INTC position is long from an average of $19.05.
- The chart shows the Arora buy zone for a trade around position was near the swing low and the Arora trade around position was exited near the swing high.
- The fact that INTC is down 51% is inline with the prior Arora call that many AI stocks could pull back 30% – 50%.
- The chart also shows the merit of the Arora approach of always taking partial profits and using trade around positions in addition to the core position.
- Intel earnings were not that bad, but the reaction is so severe because the momo crowd was buying INTC stock aggressively near the highs on margin and is now facing margin calls.
- Intel earnings and guidance were below whisper numbers due to slowing PC sales. In investors’ uber bullishness about AI, investors simply forgot that many AI companies like Intel also have their bread and butter business that should not be ignored.
- Now that INTC stock has fallen, investors need to look ahead. The future of AI is agentic AI. For agentic AI, CPUs are more efficient than GPUs. Intel is the leader in CPUs. From Intel’s conference call, Intel expects server CPU total addressable market (TAM) to rise to $200B over five years. As a reference, the present server CPU TAM is about $40B.
- Looking ahead, an actionable step for investors is to take a look at the new Arora trade around position buy zone shown on the chart.
- Investors should not underestimate the risk of margin calls potentially driving INTC stock lower than you would think.
- Just like Intel, for Amazon (AMZN), investors have been uber bullish about AI but forgot that Amazon has a very large retail business. AMZN stock has fallen after earnings due to slowing retail sales.
- Amazon earnings and guidance are below whisper numbers due to slowing retail sales.
- Again, investors need to look ahead, Amazon is projecting that AWS business could reach $1T in the next five to ten years. The reason behind such phenomenal growth is AI. As a reference, in Q3 2026 AWS reached an annual run rate of $184B, and the growth rate was 39% year-over-year.
- Back in 2022, The Arora Report was one of the first if not the first to make a high conviction call that a fortune was to be made in AI all the way to 2030 but at times it would be treacherous. Right now, investors are seeing the treacherous part. The best way to handle simultaneously being positioned for gains while protecting portfolios is to follow the Arora Protection Band.
- Just like Intel and Amazon, many AI companies that are being aggressively sold have bright futures. The reaction to earnings from Intel, Amazon, Alphabet (GOOG, GOOGL), and Meta (META) also demonstrate the importance of proper diversification. For example, oil companies Shell (SHEL) and Chevron (CVX) are hitting new highs after reporting exceptional earnings. Both SHEL and CVX are in The Arora Report portfolio.
- Cryptos are coming under aggressive selling after the biggest ever crypto heist of $6.3B from Binance. Binance is the largest crypto trading platform in the world. Here is the key question for investors. If cryptos are not safe at the world’s largest trading platform, how safe are they at other platforms?
- Crypto investors should also get ahead of the curve and be thoughtful about quantum computing approaching the time when it will be able to break crypto encryption.
- Selling in gold started in Asia to meet margin calls on AI stocks. As of this writing, gold has fallen below $4000 as more margin calls are expected. As a reference, the momo crowd was aggressively buying gold around $5500.
- Silver is breaking below $50, again on margin calls. As a reference, the momo crowd was aggressively buying silver when it was above $100.
- Oil is rising as several tankers hit mines in the Strait of Hormuz.
- 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 negative in Apple (AAPL), Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), 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 ***. 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 *** 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 are ticking down, and bonds are ticking up.
The dollar is weaker.
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 7667 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 down 67 points.
Gold futures are at $3949, silver futures are at $49.67, and oil futures are at $103.71.
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.
