SMARTEST BANKER IN THE WORLD SENDS A MESSAGE TO INVESTORS – ARE YOU LISTENING?

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By Nigam Arora & Dr. Natasha Arora

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

Important Message

Please click here for a chart of JPMorgan 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.
  • JPMorgan is the largest bank in the world by market capitalization.  JPMorgan CEO Jamie Dimon is the smartest banker in the world.
  • The chart shows that JPM stock has been running up.
  • RSI on the chart shows that JPM stock had become very overbought.  As we have been sharing with you, when a stock is very overbought, it is vulnerable to the downside on the slightest news.
  • Yesterday was JPMorgan’s investor day.  The momo crowd was aggressively buying the stock based on momentum ahead of the event on hope strategy.
  • Even though the momo crowd controls the stock market these days, there are plenty of prudent investors.  Collectively, smart money has many, many times more money than the momo crowd.
  • In response to a question, Dimon said that JPMorgan would not buy back stock at the current level.  In plain English, this means that Dimon considers the run up in JPM stock overdone.  Smart money sold the stock to the momo crowd, taking advantage of the strength generated by momo crowd buying.  However, momo crowd buying was not able to overcome smart money selling.
  • If you read correctly, recently Warren Buffett said the same thing about BRK.B stock.  Buffett is also not aggressively buying back his stock at these levels.
  • The chart shows a reversal and a big drop in JPM stock.
  • Smart money was paying attention to Dimon’s answer, and they sold the stock.
  • Knowledge is power.  The more you learn, the better you will do in the stock market.  Here are the learning moments:
    • When smart money is selling a stock like JPM, they are not selling all of the position.  They are only trimming their position.
    • The momo crowd’s behavior is all in or all out.  In contrast, smart money holds good positions for a very long time, and they simply trade around the core position.  This is exactly what The Arora Report helps you do.
    • Valuations matter.  Valuations are considered in the quantitative screen of the ZYX Change Method.  Please click here to see the six screens.
    • It pays to pay attention to overbought and oversold conditions instead of simply buying whatever is moving up like the momo crowd does.
  • JPM stock is in the ZYX Buy Model Portfolio.  It is long from $34.14.  This represents a gain of 476% for members of The Arora Report.  For new members who are not in JPM, there is a Buy Now rating if you are following the Good Way and a buy zone if you are following the Best Way in the core Model Portfolio.  Consider buying JPM stock on a dip in the buy zone.
  • Fed Governor Waller says he needs to see several months of good inflation data before supporting interest rate cuts.
  • The Fed’s Mester said that three rate cuts in 2024 is not appropriate, and she would even be open to a rate hike.
  • Prudent investors should pay attention to Fed speak instead of blindly jumping on momo guru’s rate cut bandwagon they use to persuade investors to buy stocks.
  • Among earnings, home improvement retailer Lowe’s (LOW) and department store chain Macy’s (M) reported earnings better than whisper numbers.  Cybersecurity firm Palo Alto Networks (PANW) projected earnings below consensus.
  • 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 positive in Microsoft (MSFT) and Nvidia (NVDA).

In the early trade, money flows are neutral in Apple (AAPL) and Alphabet (GOOG).

In the early trade, money flows are negative in Amazon (AMZN), Meta (META), and 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.

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, very short term trades, consider following the momo crowd and not smart money.

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 *** in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Crypto prices, including bitcoin (BTC.USD), are surging on hopes that the SEC will soon approve an ether ETF.  Ether surged over 19%.  

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.

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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.

Gold futures are at $2426, silver futures are at $31.79, and oil futures are at $78.21.

S&P 500 futures are trading at 5325 as of this writing.  S&P 500 futures resistance levels are 5400, 5500, and 5622: support levels are 5256, 5210, and 5020.

DJIA futures are up 13 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.

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.

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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 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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