By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
All Eyes On Microsoft
Please click here for a chart of Microsoft stock (MSFT).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of MSFT stock is being used to illustrate the point.
- The chart shows that MSFT stock has given up all of its gains since the breakout.
- The chart shows that MSFT is now back to the top band of the support zone.
- RSI on the chart shows that MSFT stock is now technically oversold and can easily bounce if earnings are better than expected.
- The chart shows the power of Arora buy zones. The chart shows that MSFT stock dipped into the Arora buy zone just before the last major leg up. A new Arora buy zone may be given after the earnings, if appropriate.
- Microsoft will report earnings after the close today. MSFT stock has run up on AI frenzy. In The Arora Report analysis, investors should focus on the following in Microsoft’s earnings and conference call:
- Azure growth in the last quarter
- Projected Azure growth in the current quarter
- Projected Azure growth for the year
- Monetization of Copilot
- AI related capital expenditures and what will be the return on those expenditures
- Of course, as usual, The Arora Report will be analyzing the data and publishing signals as appropriate.
- MSFT stock is in the ZYX Buy Model Portfolio from The Arora Report. Members of The Arora Report have large unrealized gains.
- In The Arora Report analysis, Microsoft earnings will be the major determinant of the AI trade. Technicals are set up for AI stocks to stage a rally from here. However, it will take better than expected earnings from Microsoft to trigger the rally. If Microsoft earnings are disappointing, it does not automatically mean another leg down in AI stocks as investors will wait for earnings from Meta (META), Amazon (AMZN), and Apple (AAPL).
- The FOMC meeting is starting today. FOMC will announce it’s decision at 2pm ET tomorrow followed by Powell’s press conference at 2:30pm ET.
- The Bank of Japan is also meeting. More important than the Fed decision is the Bank of Japan’s decision as the Bank of Japan’s decision has major implications for U.S. stocks.
- JOLTS job openings and consumer confidence will both be released at 10am ET and may be market moving.
- 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. The protection band is one of the large number of unique edges that are available to members of The Arora Report.
Magnificent Seven Money Flows
In the early trade, money flows are positive in AAPL, AMZN, and Alphabet (GOOG).
In the early trade, money flows are neutral in META, NVDA, and MSFT.
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.
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 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
Oil prices are falling on reduced Chinese demand. On the flip side, the U.S. may impose tighter sanctions on Venezuela after allegations of fraud in the election. If such sanctions are imposed, it will lower oil supply.
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
There is some disappointment among bitcoin (BTC.USD) bulls as they were expecting bitcoin to breakout after Trump’s plan to drive bitcoin to the moon. Instead of breaking out, bitcoin appears to be seeing money outflows. So far, there is not clear evidence that bitcoin whales have been selling and taking advantage of excitement by retail investors. However, whales are very good at hiding their selling activity.
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 and bonds are range bound.
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 $2432, silver futures are at $27.98, and oil futures are at $75.14.
S&P 500 futures are trading at 5513 as of this writing. S&P 500 futures resistance levels are 5622, 5748, and 5926: support levels are 5500, 5400, and 5256.
DJIA futures are down 39 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.
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.
