By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Momo Gurus Shift
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 when Nvidia earnings were released.
- The chart shows after initial volatility, the stock fell.
- The chart shows when the conference call started.
- The conference call was very positive.
- The chart shows that NVDA stock continued to fall as the conference call progressed, even though the conference call was very positive.
- The after market trading on major ECNs stopped at 8pm ET. After 8pm, some brokers allow trading via private networks. As soon as trading shifted to private networks, aggressive buying came in NVDA.
- The chart shows overnight buying lifted NVDA stock.
- The chart shows buying has continued in the premarket this morning.
- The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.
- The chart shows that the VUD indicator has been orange, indicating a net supply of NVDA stock.
- Here are the key points from Nvidia earnings:
- NVDA earnings and revenues came above the consensus but slightly less than the whisper numbers.
- NVDA guidance is above the consensus but slightly less than the whisper numbers.
- There is concern about Blackwell mask change. The stock fell primarily on Blackwell mask change. In The Arora Report analysis, the purpose of the mask change is to improve production yield, and this is not a negative in the short term; it is a positive in the long term.
- In The Arora Report analysis, a big positive is that NVDA plans to ship billions of dollars of Blackwell chips in the fourth quarter.
- The stock was hit on momo crowd selling. The momo crowd does not do much analysis. They sold because the stock was not running up after earnings as they had expected when they were buying before earnings.
- The reaction to NVDA earnings again demonstrates what we have been sharing with you all along – stocks move based on the difference between reported numbers and the whisper numbers. It is important that investors have access to analysis based on whisper numbers. Such analysis with a good track record is extremely hard to come by.
- After NVDA earnings, momo gurus’ new mantra is taking hold. Remember, momo gurus are very influential, but their real job is to run up stocks under the disguise of analysis. Momo gurus’ new mantra is dumb money was buying NVDA before earnings, ignore NVDA, and buy stocks because rate cuts are coming.
- There are two new pieces of highly concerning data that prudent investors should pay attention to, but the momo crowd is oblivious.
- Dollar General (DG) caters to very low end consumers. DG stock is crashing about 25% in the premarket as the company’s customers are coming under intense pressure.
- Wages are falling in about 40% of major U.S. cities.
- Initial jobless claims came at 231K vs. 230K consensus. The market is taking this data as a positive.
- Q2 GDP – Second Estimate came at 3.0% vs. 2.8% consensus. The market is taking this data as a positive.
- 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. The protection band is one of the large number of unique edges that are available to members of The Arora Report.
Holiday Schedule
During the reduced holiday schedule, posts on individual positions and new positions will be done as needed. The next Capsule will be on Tuesday.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).
In the early trade, money flows are negative in NVDA.
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) in 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.
Gold
The momo crowd is *** in 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.
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 $2543, silver futures are at $29.82, and oil futures are at $75.14.
S&P 500 futures are trading at 5625 as of this writing. S&P 500 futures resistance levels are 5748 and 5926: support levels are 5500, 5400, and 5256.
DJIA futures are up 255 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.
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.
