JP MORGAN KICKS OFF EARNINGS SEASON, INTEL AND AMD CHINA PROBLEM, POTENTIAL IRANIAN ATTACK

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By Nigam Arora & Dr. Natasha Arora

To gain an edge, this is what you need to know today.

High Expectations

Please click here for a chart of JP Morgan stock (JPM).

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of JPM stock is being used to illustrate the point.
  • JP Morgan has kicked off earnings season.
  • The chart shows that immediately after earnings release, JPM stock fell about 5%.
  • The chart shows that the dip buyers immediately stepped in with aggressive buying.
  • The chart shows the rising trendline after JPM reported earnings in January.
  • The chart shows that after today’s earnings release the trendline is broken, at least temporarily.
  • JPM reported EPS of $4.63 vs. $3.82 consensus.  JPM reported revenues of $42.5B vs. $38.53B consensus.
  • Even though JPM reported better than consensus, whisper numbers have been jacked up going into earnings.    Whisper numbers are the numbers analysts privately share with their best clients.  These numbers are often different from the numbers the same analysts publish.  This is a technique used by analysts to generate business.
  • The foregoing illustrates why you need to be very careful following Wall Street analysts unless you are one of their best clients.  Prudent investors depend on independent, objective sources such as The Arora Report for analysis.
  • Bank earnings are very complex.  Here is a plain English analysis from The Arora Report of JPM earnings:
    • The quarter was fine.
    • The guidance was slightly less than expected.
    • Going forward, expenses will be higher than expected.
    • Going forward, NII will be slightly less than expected. NII is the difference in the interest income between what the bank charges borrowers and what the bank pays to depositors.
  • JPM is in the ZYX Buy Model Portfolio. It is long from $34.14. This represents a 458% gain for members of The Arora Report.  There will be a separate post on what to do now.
  • Citigroup (C) reported earnings better than the consensus and better than whisper numbers.  Citigroup is a restructuring story.  So far, restructuring appears to be working.
  • Citigroup is the most lucrative stock among major banks, but consider buying it only in the buy zone.  Citigroup is in the portfolio that surrounds the Core Model Portfolio.
  • Wells Fargo (WFC) reported earnings better than the consensus but less than the whisper numbers.
  • The take home message for investors is two fold:
    • Do not trust published estimates from Wall Street analysts.  If you are their best client, focus on their whisper numbers or rely on independent sources such as The Arora Report.
    • The bar this earnings season is very high.  Since the economy has stayed strong, many companies will be able to meet the bar.  However, if the economy weakens, companies will start missing whisper numbers in future quarters.  The easiest to understand source of macro data is the Morning Capsules.  It is important for investors to stay tuned to the macro data.
  • Intel (INTC) and AMD (AMD) have a new China problem.  China is instructing its telecom carriers to stop using AMD and INTC chips.
  • We have previously written that prudent investors should stay alert to a potential Iranian attack on Israel.  Wall Street has become complacent and the momo crowd is oblivious.  However, you need to know that there are intelligence reports indicating that Iran is preparing an attack.
  • 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.
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Magnificent Seven Money Flows

In the early trade, money flows are neutral in Amazon (AMZN).

In the early trade, money flows are negative in Apple (AAPL), Alphabet (GOOG), Meta (META), Nvidia (NVDA), Microsoft (MSFT), 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.

Gold

Gold futures have crossed $2400 on intelligence reports of a potential Iranian attack.  

The momo crowd is *** in the early trade.  Smart money is *** in the early trade.

For longer-term, please see gold and silver ratings.

Oil

Oil futures are jumping on intelligence reports of a potential Iranian attack.  

The momo crowd is *** 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

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 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.

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Gold futures are at $2414, silver futures are at $29.25, and oil futures are at $86.78.

S&P 500 futures are trading at 5216  as of this writing.  S&P 500 futures resistance levels are 5256, 5400, and 5500: support levels are 5210, 5020, and 4918.

DJIA futures are down 229 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.

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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 seven 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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This post was just published on ZYX Buy Change Alert.

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Picture of Nigam Arora

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.

Picture of Dr. Natasha Arora

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.

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