By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Musk Lifts Stock Market Sentiment
Please click here for a chart of Tesla stock (TSLA).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of TSLA stock is being used to illustrate the point.
- The chart shows that TSLA stock fell to the upper band of the support zone prior to earnings.
- The chart shows a big move up after TSLA earnings.
- RSI on the chart shows that prior to earnings, TSLA stock was very oversold, and thus it was easy for it to bounce.
- TSLA reported earnings significantly worse than both the consensus and whisper numbers. Here are the details:
- Q1 earnings of $0.45 vs. $0.51 consensus
- Q1 revenue of $21.3B vs. $22.15B consensus
- GAAP gross margin of 17.4%, down 199 bps year-over-year
- Operating expenses up 37% year-over-year
- Deliveries declined 8.5% year-over-year.
- Guided 2024 vehicle volume “notably lower” than 2023
- Despite the numbers from TSLA earnings, Elon Musk has lifted sentiment in the entire stock market by saying that buying a regular car is like “riding a horse and using a flip phone.”
- Here are the other key points from Musk that are lifting the sentiment in the entire stock market:
- Tesla is accelerating development of several low priced cars.
- Tesla plans to own and deploy a fleet of 1M robotaxis.
- Tesla has increased its AI training capacity from 15,000 Nvidia H100 GPU equivalents at the beginning of the year to 40,000 now. Musk is projecting a compute capacity of 85,000 H100 equivalents by the end of the year.
- Musk made the most convincing case yet that Tesla is not a car company but an AI company.
- Musk’s statement is especially boosting AI stocks such as Nvidia (NVDA), AMD (AMD), Super Micro Computer (SMCI), Taiwan Semiconductor (TSM), Applied Materials (AMAT), and ARM (ARM).
- There are two earnings of note this morning.
- Boeing (BA) earnings are being well received by the stock market. BA stock is up.
- Vertiv (VRT), a maker of cooling equipment for AI servers, is rocketing after better than expected earnings.
- The new data on durable orders is strong. Here are the details:
- Durable orders came at 2.6% vs. 1.8% consensus.
- Durable goods ex-transport came at 0.2% vs. 0.3% consensus.
- The U.S. Treasury will conduct a record auction of $70B of five year Treasuries. We will be carefully watching the results and will let you know if a canary in the coal mine develops.
- It is important for investors to carefully watch longer duration Treasury auctions due to the second blunder that the Fed has committed. The second blunder is Powell’s press conference in December 2023. The easiest way to understand the blunder is to listen to the podcast in Arora Ambassador Club. To get on the waitlist to join the club, please click here to fill out the form.
- Of note is that yesterday, the Treasury conducted a record auction of $69B of two year Treasuries. The auction was excellent with yield coming at 4.898%, lower than expected. The reason is that investors are shifting money from money market funds to two year Treasuries.
- 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.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Microsoft (MSFT), Meta (META), NVDA, and Tesla (TSLA).
In the early trade, money flows are neutral in Apple (AAPL).
In the early trade, money flows are negative in Alphabet (GOOG).
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 *** in the early trade.
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
API crude inventories came at a draw of 3.23M barrels vs. a consensus of a build of 1.8M barrels.
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
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 up, and bonds are ticking down.
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 $2337, silver futures are at $27.37, and oil futures are at $83.08.
S&P 500 futures are trading at 5111 as of this writing. S&P 500 futures resistance levels are 5210, 5256, and 5400: support levels are 5020, 4918, and 4852.
DJIA futures are down 57 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.
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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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.
