By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
iPhone 15
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows that QQQ has moved decisively above the downward sloping trendline.
- The chart shows that RSI has quickly gone from oversold to overbought.
- Both of the foregoing are bullish behaviors.
- In yesterday’s Afternoon Capsule, we shared with you two new negative data points for the economy. We wrote:
The chart shows when consumer confidence and the JOLTS report were released.
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Consumer confidence came at 106.1 vs. 116.0 consensus.
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JOLTS job openings came at 8.825M vs. 9.5M consensus.
- This morning there are two new negative data points for the economy:
- The ADP employment change came at 177K vs. 195K consensus.
- Q2 GDP-second estimate came at 2.1% vs. 2.4% consensus.
- The rise in the stock market is due to three reasons.
- Excitement about AI – OpenAI, the creator of ChatGPT, has reached a $1B run rate.
- iPhone 15 will be launched on September 12. Apple stock (AAPL) historically moves up going into the launch and sells off after the launch. Since Apple is the biggest stock and has heavy weight in indexes, it has a disproportionate impact.
- The new economic data points are weak.
- Inflation is back in Europe.
- In Spain, CPI came at 0.5% month-over-month vs. 0.4% consensus.
- In Germany, flash CPI came at 0.3% month-over-month vs. 0.3% consensus. Inflation accelerated in four German states.
- 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.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Apple (AAPL).
In the early trade, money flows are negative in Tesla (TSLA).
In the early trade, money flows are mixed 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.
Gold
Gold is rising on weak economic data.
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
API crude inventories came at a draw of 11.486M barrels vs. a consensus of a draw of 2.9M barrels.
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) ran up yesterday after GBTC’s victory against SEC in court. This morning bitcoin is giving up some of yesterday’s gain as investors realize that the court victory does not automatically mean approval of a bitcoin ETF.
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 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.
Gold futures are at $1971, silver futures are at $25.24, and oil futures are at $81.61.
S&P 500 futures are trading at 4509 as of this writing. S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.
DJIA futures are up 54 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.
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.
