WALL STREET COMES TO NVIDIA’S DEFENSE AFTER BIGGEST LOSS EVER, MANY MOMOS WIPED OUT

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By Nigam Arora & Dr. Natasha Arora

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

Largest Market Cap Loss Ever

Please click here for a chart of Nvidia stock (NVDA).

Note the following:

  • The chart shows the drop in NVDA stock stopped before it reached the mini support zone.
  • Volume shown on the chart is very heavy, indicating conviction in the pullback.
  • RSI on the chart shows that NVDA is not oversold, indicating there is more room to the downside.
  • Yesterday, NVDA lost $589B in market cap.  This is the largest one day loss ever for any company.
  • Yesterday illustrates the importance of diversification and proper portfolio construction.  At this time, many retail investors are almost exclusively in AI stocks – such investors suffered massive losses yesterday.  The Arora Report Model Portfolios are illustrations of how to properly construct portfolios using over 50 different strategies.  
  • Wall Street is coming to Nvidia’s defense. In The Arora Report analysis, further clarity is needed.  Nvidia issued a statement on DeepSeek, but the statement does not provide any clarity probably because Nvidia is in a quiet period prior to earnings.
  • Americans are willy-nilly installing DeepSeek without realizing it is opening their entire device to China.  DeepSeek is the most popular app in the Apple App Store.
  • Before the stock market opened yesterday, The Arora Report shared with you that Wall Street woke up after about a month after the prior version of DeepSeek was made available at Christmas time.  We also shared with you our skepticism about the cost of $6M for DeepSeek.
  • Upon further analysis, The Arora Report now has high conviction that the stated cost of DeepSeek is highly misleading.  This is important because it is the stated low cost figure that panicked Wall Street. 
  • For the first time in 20 years, three remarkable things happened yesterday when S&P 500 declined 1.5%:
    • The number of rising stocks far surpassed the number of declining stocks, 350 vs. 152.
    • Value stocks surged.
    • S&P 500 Equal Weight ETF (RSP) was little changed.
  • In The Arora Report analysis, instead of going into cash, investors exited AI stocks and bought value stocks.
  • Chips stocks are rising on a suggestion that Trump will place tariffs on imported chips.
  • There is also a report of Trump potentially imposing a universal tariff of at least 2.5%.
  • Those in the momo crowd who exclusively buy out of money call options on popular stocks have seen their accounts completely wiped out.  In our decades in the markets, we have seen this again and again – many in the momo crowd make a lot of money by recklessly buying options and then go on to lose their entire accounts.
  • Those in the momo crowd who still have money are aggressively buying NVDA, AMD, CCJ, OKLO, NNE, SOFI, PLTR, RGTI, QUBT, and WIMI.  WIMI announced it will use DeepSeek, catching the attention of the momo crowd.
  • In The Arora Report analysis, it is important to understand that irrespective of how cheap it may be, corporate America is not going to make a Chinese model like DeepSeek the backbone of their AI efforts.  
  • Looking forward, we will be careful listening to earnings calls from Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Tesla (TSLA) to see if they are making changes to their capital expenditure plans after DeepSeek.
  • Durable goods came weaker than expected.
    • Durable goods came at -2.2% vs. 0.4% consensus.
    • Durable goods ex-transportation came at 0.3% vs. 0.5% consensus.
  • Consumer confidence will be released at 10am ET and may be market moving.
  • The FOMC meeting starts today.  The rate decision will be announced tomorrow at 2pm ET, followed by Powell’s press conference at 2:30pm ET.
  • 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.
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Magnificent Seven Money Flows

In the early trade, money flows are positive in Alphabet (GOOG), Meta (META), and Nvidia (NVDA).

In the early trade, money flows are neutral in Apple (AAPL), Microsoft (MSFT), and Tesla (TSLA).

In the early trade, money flows are negative in Amazon (AMZN).

In the early trade, money flows are neutral 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.

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.

Very Very Short-Term Indicator

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.

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.

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For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) was first sold yesterday along with tech stocks.  The dip under $100K was bought.  As of this writing, bitcoin has stabilized over $100K.

Markets

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.

S&P 500 futures are trading at 6053 as of this writing.  S&P 500 futures resistance levels are 6131, 6256, and 6500: support levels are 6017, 5926, and 5748.

DJIA futures are down 64 points.

Gold futures are at $2752, silver futures are at $30.53, and oil futures are at $73.04.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.  The proprietary protection band from The Arora Report is very popular.  The protection band puts all of the data, all of the indicators, all of the news, all of the crosscurrents, all of the models, and all of the analysis in an analytical framework that is easily actionable by investors.

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding *** in cash, Treasury bills, short term fixed income, 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.

See also  MOMO CROWD BUYS STOCKS ON TRUMP IMPOSING NEW TARIFFS, CHINA FREES UP BILLIONS TO BUY GOLD

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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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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