NVIDIA EARNINGS AND JACKSON HOLE WILL DETERMINE WHAT IS NEXT FOR THE STOCK MARKET

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By Nigam Arora & Dr. Natasha Arora

To gain an edge, this is what you need to know today.

What Is Next

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 Nvidia stock is being used to illustrate the point.
  • What happens next in the stock market will come down to Nvidia earnings and Powell’s speech at Jackson Hole.
  • The chart shows when Nvidia earnings were last released.  Nvidia guided current revenues to $11B from $7B for the quarter.
  • The gap up shown on the chart added about $184B in market cap.  This was the third largest market cap gain in one day in U.S. stock market history.
  • Nvidia earnings accelerated the AI frenzy rally.
  • The chart shows that there was a 262% gain in the Nvidia position if it was bought in the Arora buy zone shown on the chart.
  • In addition, the trade around position in Nvidia has been nicely profitable.  Trade around positions are a technique used by hedge funds and billionaires that can dramatically increase your returns and reduce  your risks.  To learn about trade around positions, please see the Trade Management Guidelines.
  • In The Arora Report analysis, the demand for AI chips from Nvidia is far exceeding supply.  As good as this sounds, the whisper numbers have moved up.  Nvidia guided current quarter sales to $11B but whisper numbers are around $12B.  A lot will also depend on what Nvidia guides for the current quarter that ends in October.  Whisper numbers are around $12.5B.
  • A major factor will also be what Nvidia guides for 2025.
  • In The Arora Report analysis, if no other competition emerges, Nvidia will be looking at $18B in quarterly revenues.  On the surface, Nvidia stock seems very expensive.  It is trading at a forward PE of 42.  However, in The Arora Report analysis, this PE can be justified based on the potential growth.
  • Prudent investors should stick to the discipline of buying strategic positions in the buy zones and surrounding them with trade around positions as signals are given.  
  • Nvidia earnings are scheduled to be released on Wednesday after the close.
  • Powell will be speaking at Jackson Hole on Friday.
    • Bulls are hoping that he will say rate cuts are coming.
    • Momo gurus are already laying the groundwork to twist his words to run up the stock market irrespective of what he says.
  • In The Arora Report analysis,  the highest probability is that Powell will say the Fed will be data dependent.  
  • 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.
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Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Meta (META), Tesla (TSLA), and Apple (AAPL).

In the early trade, money flows are negative in Alphabet (GOOG).

In the early trade, money flows are mixed in S&P 500 ETF SPY and Nasdaq 100 ETF QQQ.

China

Interest rate cuts in China were less than expected.  This caused a sell off in Shanghai and Hong Kong. Stocks in Mainland China were down 1.2% and stocks in Hong Kong were down 1.8%.  The ETF of choice for Mainland China is ASHR.   The ETF of choice for Hong Kong is FXI.  ZYX Emerging from The Arora Report has covered China continuously for 16 years.

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

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.

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Interest rates are ticking up, and bonds are ticking down.

The dollar is weaker.

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 $1925, silver futures are at $23.26, and oil futures are at $81.63.

S&P 500 futures are trading at 4392 as of this writing.  S&P 500 futures resistance levels are 4460, 4600, and 4713: support levels are 4318, 4200, and 4000.

DJIA futures are up 24 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.

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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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This post was just published on ZYX Buy Change Alert.

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Picture of Nigam Arora

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.

Picture of Dr. Natasha Arora

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.

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