By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Market Mechanics
Please click here for a chart of Apple stock (AAPL).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. A chart of AAPL stock is being used to illustrate the point.
- AAPL is the largest stock and carries heavy weight in the indexes. For this reason, AAPL stock is very important to the stock market. Apple reports earnings after the market close.
- The chart shows that AAPL stock made a lower low below the support/resistance zone.
- The chart shows that AAPL stock moved up back into the support/resistance zone yesterday on the Fed and market mechanics induced rally.
- Market mechanics continue to drive aggressive stock buying this morning.
- Apple has been showing declining growth for several quarters, and Apple has China troubles. AAPL stock is also very expensive. However, none of the traditional fundamentals seem to matter in the case of Apple because a large number of investors believe in Apple and they want to buy AAPL stock.
- We will be carefully looking at Apple’s sales in China, iPhone sales, services growth, and AI plans. The mention of AI is still very powerful. For example, AMD (AMD) reported weak earnings Tuesday. After earnings, the stock fell to $94, but aggressive buying came in when the company gave rosie projections of its AI chip. The stock moved up $14 from its low.
- The all important jobs report will be released Friday at 8:30am ET. The jobs report will test the budding rally in stocks.
- Initial jobless claims came at 217K vs. 214K consensus. This indicates that the jobs picture is staying strong. Initial jobless claims is a leading indicator and carries heavy weight in our adaptive ZYX Asset Allocation Model with inputs in ten categories. In plain English, adaptiveness means that the model changes itself with market conditions. Please click here to see how this is achieved. One of the reasons behind The Arora Report’s unrivaled performance in both bull and bear markets is the adaptiveness of the model. Most models on Wall Street are static. They work for a while and then stop working when market conditions change.
- Q3 Unit Labor Costs – Prelim came at -0.8% vs. 1.5% consensus. In The Arora Report analysis, this is very positive data for the stock market.
- Q3 Productivity – Prelim came at 4.7% vs. 3.6% consensus. In The Arora Report analysis, this increase in productivity is also very positive for the stock market. In the long run, the use of AI will significantly increase productivity.
- Please be sure to read yesterday’s Afternoon Capsule as hedges were reduced and the call was to deploy more cash, i.e. buy more stocks.
- A part of yesterday’s rally in the afternoon was blind money buying. Blind money buying will continue today.
- 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.
England
The Bank of England left its rate unchanged at 5.25% vs. 5.25% consensus.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple.
In the early trade, money flows are positive 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
The momo crowd is *** gold in the early trade. Smart money is *** gold 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 *** oil in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) has crossed $35,000.
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 $1997, silver futures are at $23.11, and oil futures are at $80.76.
S&P 500 futures are trading at 4295 as of this writing. S&P 500 futures resistance levels are 4318, 4400, and 4460: support levels are 4200, 4000, and 3950..
DJIA futures are up 220 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 21% – 39% in cash or Treasury bills or allocated to short-term tactical trades; and short to medium-term hedges of 3% – 5%, and short term hedges of 5% – 11%. 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.
