By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
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 stock is being used to illustrate the point.
- Nvidia earnings will be released after the market close.
- Nvidia earnings will have a major impact on the entire stock market. The reason is that the two major driving forces behind the stock market have been market mechanics and artificial intelligence. It is Nvidia’s GPUs that have made the current progress in AI possible.
- The chart shows that Nvidia broke out yesterday.
- The chart shows Nvidia dipping in the Arora buy zone in late 2022 at an average buy price of $125.51.
- The chart shows that subsequently Nvidia ran up to about $500 and then dipped again into the new Arora buy zone.
- The chart also shows a successful Nvidia trade around position. A trade around position is a billionaire and hedge fund technique that can significantly increase your profits and reduce your risks.
- The chart shows that in November Nvidia has been on a massive run.
- Wall Street is positioned for Nvidia earnings to the moon. If Wall Street is correct, expect continued upward momentum in the stock market. Positioning is one of the important Wall Street mechanics. Those who want to take their investing to the next-level may consider listening to the podcast in Arora Ambassador Club titled “Market Mechanics: Positioning.”
- When the positioning is so positive in a key stock, there is always significant risk to the downside if earnings do not meet the lofty expectations.
- The tentative plan is to start a trade around position in Nvidia if the stock dips.
- FOMC minutes will be released at 2pm ET. We will be looking for confirmation of Wall Street’s consensus that the Fed is done raising rates.
- 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.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Nvidia (NVDA) and Microsoft (MSFT).
In the early trade, money flows are negative in Alphabet (GOOG), Meta (META), Tesla (TSLA), Apple (AAPL), and Amazon (AMZN).
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.
As of this writing, gold futures are just going above $2,000.
The momo crowd is *** gold in the early trade. Smart money is *** gold in the early trade.
For longer-term, please see gold and silver ratings.
The momo crowd is *** in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin (BTC.USD) is range bound.
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 and bonds are range bound.
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 $2001, silver futures are at $23.90, and oil futures are at $77.45.
S&P 500 futures are trading at 4548 as of this writing. S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.
DJIA futures are down 48 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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