By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Consumer Roars
Please click here for a chart of Nvidia stock (NVDA).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of NVDA is being used to illustrate the point.
- Investors are waiting for the release of King Nvidia earnings today after hours. Nvidia earnings will determine the near term direction of the stock market and the AI trade.
- The chart shows NVDA stock has consolidated in the lower half of zone 2.
- RSI on the chart shows NVDA stock is neither overbought nor oversold going into earnings.
- After earnings, bulls expect NVDA stock to break above zone 2 and move into zone 1 shown on the chart. Bears expect NVDA to pull back to zone 3.
- NVDA stock is in the ZYX Buy Core Model Portfolio, long from $12.55. Long time members of the Arora Report have a 986% gain on the core position.
- One of the concerns in the stock market has been dropping consumer confidence. The latest reading shows the consumer has roared back with renewed faith in President Trump. Here are the key points:
- Consumer confidence came at 98.0 vs. 87.0 consensus.
- Consumer confidence surged by 12.3 points in the biggest monthly gain in four years.
- A separate measure of consumer expectations for the next six months moved up by the most in 14 years. The consumer is roaring back broadly across income groups and age.
- The trigger behind the consumer roaring back is President Trump agreeing to the greatest deal ever for China with almost nothing in return for the U.S. Consumers are addicted to China flooding the U.S. market with low cost goods. Just like addicts cannot understand the broader implications of their addiction, consumers do not understand that their addiction to Chinese goods is transferring wealth from the U.S. to China and helping China towards its goal of overthrowing the U.S. as the world’s superpower.
- The data shows that consumers, especially Republicans, now have renewed faith in President Trump because he struck a deal with China to keep shelves full of cheap Chinese goods.
- In The Arora Report analysis, the rise in consumer confidence is a significant positive for the stock market in the short term, but the trigger behind the rise is a significant negative for the U.S. in the longer term. Prudent investors should note that the reprieve for China is only for 90 days. The consensus on Wall Street is that President Trump will chicken out, and China will maintain its greatest deal ever. Wall Street even has a name for the trade: TACO (Trump Always Chickens Out). In The Arora Report analysis, prudent investors should not be so sure of TACO – there is a fairly high probability that Trump will hold out for a better deal than the provisional deal. If Trump holds out for a better deal, the stock market may experience another dip
- FOMC minutes will be released today at 2pm ET and may be market moving.
- As an actionable item, the sum total of the foregoing is in the Arora Protection Band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the Arora Protection Band. The Arora 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 Apple (AAPL), Alphabet (GOOG), Tesla (TSLA), and NVDA.
In the early trade, money flows are neutral in Amazon (AMZN), Microsoft (MSFT), and Meta (META).
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.
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. Smart money is an important indicator but is only one of hundreds of indicators that go into determining the Arora Protection Band and signals. Please click here and here to understand how signals are generated.
Very Very Short-Term Indicator
The Arora Report’s proprietary 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 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.
S&P 500 futures are trading at 5940 as of this writing. S&P 500 futures resistance levels are 6017, 6131, and 6256 : support levels are 5926, 5748, and 5622.
DJIA futures are down 4 points.
Gold futures are at $3308, silver futures are at $33.33, and oil futures are at $61.64.
Arora Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror. The proprietary Arora Protection Band from The Arora Report is very popular. The Arora Protection Band puts all of the data, all of the indicators, all of the news, all of the crosscurrents, all of the models, and all of the analysis in an analytical framework that is easily actionable by investors.
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.
