By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Not As Bad As Feared
Please click here for a chart of Microsoft (MSFT).
Note the following:
- The Morning Capsule is about the big picture and not about an individual company. The chart of Microsoft is being used to illustrate the big picture.
- The chart shows when Microsoft earnings were released.
- Microsoft missed earnings on most of the metrics. The most important is Azure growth, it came at 40% vs. 43.1% consensus. The chart shows the low to which Microsoft stock fell after the earnings miss.
- The chart shows a dramatic spike up in the MSFT stock when MSFT guided growth for the year in double digits.
- MSFT guide caused stock futures to open significantly higher.
- The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.
- The chart shows that the VUD indicator was mostly orange during the explosive rally. This indicates that buyers were extremely aggressive and willing to buy irrespective of the price but there were sellers waiting to sell only at high prices.
- Here is the story of other key earnings.
- Alphabet (GOOG) (GOOGL) missed on every single metric with the exception of advertising. Investors were fearful of advertising after warnings from Snap (SNAP) and Twitter (TWTR). Investors bought on the company not missing advertising revenues.
- Boeing (BA) missed the earnings but investors bought on earnings not including any new charges.
- Texas Instruments (TXN), a key semiconductor manufacturer, reported solid results. Investors bought oblivious of the fact that going forward the company is facing pricing pressures.
- Visa (V) reported solid earnings. Visa is not seeing the issues with consumers that Walmart (WMT) and AT&T (T) are seeing.
- Teradyne (TER), a key semiconductor testing equipment company, reported good earnings but is guiding lower.
- The sum total of the foregoing is that the momo crowd got an excuse to aggressively buy stocks because earnings were not as bad as feared.
- In The Arora Report analysis, earnings will get worse unless the Fed stops fighting inflation or inflation dramatically drops. However, this is foreward-looking analysis. For the time being the market is controlled by the momo crowd and the momo crowd is not interested in looking forward. They just want to buy stocks now.
The Fed
The FOMC will announce its decision at 2:00 pm ET. Powell press conference will take place at 2:30 pm. There is a 75% probability of a 75 basis point rate hike.
The key question is what will Powell say about the forward guidance. Smart money will be paying attention to the forward guidance. As far as the momo crowd is concerned, their gurus have already told them to buy aggressively after the Fed.
Durable Goods
Durable Goods came at 1.9% vs. -0.5% consensus.
Durable Goods Ex-transportation came at 0.3% vs. 0.3% consensus.
South Korea
We have previously shared with you positive data from South Korea. South Korea is a major export economy and potentially offers an early indicator.
Today there is negative data from South Korea – consumer confidence fell to 86.0 from 96.4.
South Korea has been continuously followed for 15 years in ZYX Emerging.
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
The momo crowd is 🔒 in 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 🔒 oil in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin is bouncing in sympathy with Coinbase (COIN). COIN stock fell out of bed yesterday on SEC investigation. As a full disclosure, ZYX Short had a signal to short sell COIN right near the top and the position is now very profitable.
Markets
Our very, very short-term early stock market indicator is 🔒 and will depend on the Fed but expect the market to open 🔒. 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 $1715, silver futures are at $18.53, and oil futures are $94.43.
S&P 500 futures resistance levels are 4000, 4200 and 4318: support levels are 3950, 3860 and 3770.
DJIA futures are up 158 points.
Protection Bands and What To Do Now?
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold 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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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.
