By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Unrealistic Expectations
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 when Microsoft earnings were released.
- The chart shows MSFT stock initially spiked higher on earnings better than the consensus and whisper numbers.
- The chart shows when MSFT stock dropped on comments of slower Azure growth during Microsoft’s conference call.
- Azure growth came at 34% vs. 31% consensus.
- Azure growth is expected to slow to 31% – 32%.
- In The Arora Report analysis, investors are selling MSFT stock because their expectations were unrealistically high. Regarding Azure growth, investors are ignoring the following:
- Azure growth should pick up in the second half of 2025.
- Microsoft is capacity constrained. In due course, capacity will increase as supply of Nvidia (NVDA) chips increases.
- Generative AI contributed 12% to Azure.
- Generative AI is expected to exceed a $10B run-rate in Q2 2025.
- The Arora Report’s proprietary VUD indicator shows net supply of MSFT stock yesterday afternoon leading into and during the earnings release.
- Meta (META) reported great earnings. Investors are overlooking the great earnings and focusing on the high spending.
- In The Arora Report analysis, Meta’s capital expenditure is not out of line with its ambitious AI goals.
- Meta anticipates 2024 capital expenditure to be $38B – $40B from prior $37B – $40B.
- Initial jobless claims came at 216K vs. 229K consensus. This indicates that the jobs picture remains strong.
- The U.S. economy is 70% consumer based. For this reason, prudent investors pay attention to personal income and personal spending. Personal spending is strong. Here are the details of the new personal income and spending data:
- Personal income came at 0.3% vs. 0.4% consensus.
- Personal spending came at 0.5% vs. 0.4% consensus.
- PCE is the Fed’s favorite inflation gauge. The core data is hotter than expected. Here are the details:
- PCE came at 0.2% vs. 0.2% consensus.
- Core PCE came at 0.3% vs. 0.2% consensus.
- The official jobs report will be released tomorrow at 8:30am ET. It is an important data point for the state of the jobs market ahead of the FOMC meeting next week.
- Amazon (AMZN) and Apple (AAPL) report earnings today after the close.
- 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 neutral in AAPL and Tesla (TSLA).
In the early trade, money flows are negative in Alphabet (GOOG), META, AMZN, NVDA, and MSFT.
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 *** 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.
Very Very Short-Term Indicator
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.
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 *** oil 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
Interest rates are ticking up, and bonds are ticking down.
The dollar is down.
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.
S&P 500 futures are trading at 5812 as of this writing. S&P 500 futures resistance levels are 5926 and 6017: support levels are 5748, 5622, and 5500.
DJIA futures are down 242 points.
Gold futures are at $2782, silver futures are at $33.56, and oil futures are at $69.23.
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, Treasury bills, short term fixed income, 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.
