By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Extending AI Dominance
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 the Arora signal to hedge NVDA stock near the high prior to the big drop shown by the outside day on the chart. Members of The Arora Report have huge profits in Nvidia as NVDA was bought at an average price of $125.51 in the buy zone shown on the chart.
- The signal to hedge NVDA stock was given ahead of the much anticipated Nvidia GTC. The momo crowd aggressively bought ahead of GTC. The chart shows that the Arora call to hedge, so far, has been as perfect of a signal as it gets in real life. So far, there has been a sell the news reaction to the Nvidia conference.
- We had previously shared with you that Nvidia has become the favorite of the momo crowd, replacing Tesla (TSLA) for aggressively buying call options. Yesterday, the momo crowd turned NVDA stock into a casino. The momo crowd was buying stock options betting that NVDA stock would double by the end of the week – now think about it, doubling in NVDA would mean adding $2T of market value in one week. Even a simple analysis would have shown that NVDA stock doubling in a week was impossible, but do not tell that to the momo crowd. The momo crowd was wagering its hard earned money on the impossible that NVDA stock would double this week. The YOLO (you only live once) element has turned NVDA stock into a casino.
- The chart shows that NVDA stock has broken the trendline in the early trade. However, it is still early. NVDA stock can recover from here. If NVDA stock does not recover and decisively breaks the trendline, expect more selling to come in.
- ‘Incredible’ is the only word that can describe Nvidia CEO Jensen Huang’s keynote speech. Nvidia is clearly on a path to extend its AI dominance.
- It is still early in the AI race.
- Nvidia announced that Blackwell will be the successor to Hopper. Hopper is the present generation AI chip.
- Blackwell performs significantly better in both inference and training compared to Hopper.
- Blackwell enables generative AI on trillion parameter large language models.
- There is a new 800G backend switch on both Ethernet and InfiniBand.
- Nvidia is strategically moving to capture more of the value chain for AI.
- It is very important for investors who are serious about capturing profits from AI over the next several years to develop a deeper understanding of AI and how to invest in AI. The easiest and best way is to listen to the podcasts in Arora Ambassador Club. We are already seeing a performance difference between two groups – those who listen to the podcasts in Arora Ambassador Club and those who do not. If you would like to get on the waitlist to join the club, please fill out the form below.
- FOMC meeting starts today.
- 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.
Housing
Housing continues to be strong. Housing starts came at 1.521M vs. 1.435M consensus.
Building permits came at 1.518M vs. 1.485M consensus.
Japan
Bank of Japan (BoJ) raised interest rates for the first time in 17 years, exiting negative rates. Japan was the last country to have a negative interest rate. BoJ’s dovish commentary indicates that Japan is not about to enter a tightening cycle like the U.S. and Europe.
We have been sharing with you that what the BoJ does will have a major impact on the U.S. stock and bond markets. In the long term, this is negative for the U.S. stock market. Money was borrowed in Japan at negative interest rates and then invested in the U.S. markets and elsewhere. With interest rates in Japan now in the positive, less money will flow from Japan into the U.S. markets.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Apple (AAPL) and Alphabet (GOOG).
In the early trade, money flows are negative in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Meta (META), and Tesla (TSLA).
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.
Gold
The momo crowd is *** 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 *** in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is dropping as bitcoin whales take profit and whale memes follow the whales in taking profits.
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 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 $2161, silver futures are at $25.08, and oil futures are at $82.09.
S&P 500 futures are trading at 5198 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 19 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.
