By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Negative Nvidia Pattern
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.
- The chart shows that NVDA stock has traced an outside day. An outside day is a reversal pattern in traditional technical analysis.
- The chart shows that The Arora Report gave a signal to partially hedge the NVDA position when NVDA was trading at $952.74, right near the very top. Since the signal to hedge NVDA stock, NVDA has lost about $250B worth of value. The Arora signal to hedge NVDA has now proven prescient.
- The chart shows that NVDA is long from $125.51 when NVDA stock fell in the Arora buy zone shown on the left side of the chart.
- The chart shows that the reversal pattern in NVDA stock was on heavy volume. This is negative.
- Nvidia is important for the following reasons.
- Nvidia is the center of the artificial intelligence revolution.
- Nvidia has been the best performing large cap tech stock.
- About one third of S&P 500 performance is due to Nvidia.
- Nvidia has become the favorite of the momo crowd, replacing Tesla (TSLA).
- Nvidia usually has the most option volume on the call side, indicating the YOLO (you only live once) mentality that has seeped into the stock market.
- The move in NVDA stock is actively impacting the entire semiconductor sector. As we have written before, semiconductors are the leading sector. The Arora Report members had an advanced notice that semiconductors may fall from the signal given in ZYX Allocation to take partial profits in semiconductor ETF SMH just prior to the drop. That Arora signal has now proven spot on.
- The next major event ahead is CPI data that will be released tomorrow morning at 8:30am ET. The consensus is 0.3% for both the headline and the core. However, whisper numbers are lower as Wall Street believes that inflation has dramatically slowed down.
- CPI data will be a major test of the extreme positive sentiment that has prevailed on Wall Street.
- As we have previously written, extreme positive sentiment is a contrary signal, but it is not a precise timing signal.
- Expect momo gurus to come up with new narratives to buy the dip in NVDA and other semiconductor stocks. Prudent investors who pay attention to not only rewards but also risks may consider waiting for Arora buy zones.
- Quadruple witching is ahead on Friday and often leads to volatility. In quadruple witching, stock index futures, futures options, stock options, and single stock futures expire.
- March 9 was the 15th anniversary of the backup the truck Arora buy signal. Hindsight shows that the backup the truck Arora buy signal coincided with the exact low of S&P 500 at 666 prior to the start of the epic bull market.
- 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.
Japan
The Japanese stock market experienced a major sell off after making new highs. Of course, members of The Arora Report had advanced notice. Last week, a signal was given to take partial profits on Japan ETF EWJ in ZYX Allocation prior to the drop in the Japanese stock market. The signal has now proven spot on.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Apple (AAPL), Alphabet (GOOG), and TSLA.
In the early trade, money flows are negative in Amazon (AMZN), Meta (META), Microsoft (MSFT), and NVDA.
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 *** stocks in the early trade.
Gold
Central banks are buying gold. Central banks of China, India, and Turkey bought 30 metric tons of gold in January.
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) has moved above $72,000. Two pieces of news are helping.
- One is the London Stock Exchange will allow applications for bitcoin and ethereum ETNs. British regulators say that bitcoin is not suitable for retail investors. For this reason, they will allow the ETNs only for professionals.
- The second piece of news is that MicroStrategy (MSTR) is buying an additional 12,000 bitcoin for $821.7M cash.
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 down, and bonds are ticking up.
The dollar is range bound.
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 $2183, silver futures are at $24.60, and oil futures are at $77.69.
S&P 500 futures are trading at 5175 as of this writing. S&P 500 futures resistance levels are 5210, 5400, and 5500: support levels are 5020, 4918, and 4852
DJIA futures are down135 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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This post was just published on ZYX Buy Change Alert.
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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.
