By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Hopium Meeting Reality
Please click here for a chart of Hims & Hers Health stock (HIMS).
Note the following:
- In many areas, hopium from President Trump is justified. However, the momo crowd has taken it to an extreme. As an example, to the best of our knowledge, President Trump has not made a vigorous public statement saying that he would allow copycat versions of weight loss drugs by changing the current law. Yet, the momo crowd, with its absolute faith in President Trump, continued to buy HIMS stock believing President Trump would be their savior.
- The Morning Capsule is about the big picture, not an individual stock. The chart of HIMS is being used to illustrate the point. HIMS is a telehealth company that has grown rapidly by selling copycat weight loss drugs. The law allows compounded versions when there is a shortage.
- The chart shows the momo crowd was aggressively running up HIMS stock when the FDA posted on its website that the Wegovy and Ozempic shortage had ended. Wegovy and Ozempic are weight loss drugs from Novo Nordisk (NVO). Semaglutide is the active ingredient of these drugs. HIMS has been selling a copycat version of semaglutide.
- It was well known that the Wegovy and Ozempic shortage was going to end in February. Yet, the momo crowd continued to buy HIMS stock on the belief that President Trump would bar the FDA from enforcing the law.
- Previously, a shortage of Eli Lilly’s (LLY) weight loss drug Zepbound with active ingredient tirzepatide had ended. HIMS was involved in compounding tirzepatide. At that time, HIMS stock was trading much lower than where it has been trading recently. HIMS stock initially dropped, and the momo crowd aggressively bought the dip. HIMS mainstay was semaglutide, and not tirzepatide. The momo crowd continued to run up HIMS stock on hopium that by the time the Wegovy and Ozempic shortage ended, President Trump would be in office and would save them.
- The chart shows the drop in HIMS stock even though the FDA said it was not taking any action against compounders for violations.
- The chart shows another big drop on earnings after the market closed yesterday, even though earnings were good. The reason the stock dropped is HIMS said it would stop selling the compounded version of semaglutide.
- Prudent investors should note the drop in HIMS stock in a short time from about $72 to $40.44 as of this writing in the premarket when unrealistic Trump hopium did not come through. Many stocks have been run up on unrealistic Trump hopium. Some stocks are beginning to see a selloff. Examples include Palantir (PLTR), MicroStrategy (MSTR), Coinbase (COIN), Robinhood (HOOD), Oklo (OKLO), and Carvana (CVNA).
- In The Arora Report analysis, the stock market is beginning to realize that the momo crowd buying on President Trump hopium has been excessive.
- Adding to the stock market’s anxiety this morning, the Trump administration is working on tougher restrictions of U.S. semiconductors. The aim is for allies to apply the same pressure towards China. Trump’s team met with Dutch and Japanese counterparts regarding restricting ASML Holding (ASML) and Tokyo Electron (TOELY) maintenance of semiconductor equipment in China. Similar restrictions are in place for American chip companies, including Applied Material (AMAT) and Lam Research (LRCX).
- Also adding to the anxiety are investors waking up to Taiwan’s vulnerability. Please see the section below.
- Consumer confidence will be released at 10am ET and may be market moving.
- Nvidia (NVDA) will report earnings after the close tomorrow. All eyes are on NVDA as these earnings may be a make or break moment for the stock market.
- 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.
Chinese Ship Caught
Taiwan is very dependent on undersea cables for the internet and communications. A Chinese ship has been caught cutting an undersea cable. As we have previously shared, in the event of China invading Taiwan, the first action from China will likely be cutting undersea cables. For those wanting next level information, there is a podcast in Arora Ambassador Club.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Nvidia (NVDA).
In the early trade, money flows are neutral in Apple (AAPL), Amazon (AMZN), and Meta (META).
In the early trade, money flows are negative in Alphabet (GOOG), Microsoft (MSFT), and Tesla (TSLA).
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.
For longer-term, please see oil ratings.
Bitcoin
Whales from Asia appear to be selling bitcoin (BTC.USD) to mom and pop in the U.S. Whales’ selling is causing bitcoin to drop below $90,000.
Markets
Interest rates are ticking down, and bonds are ticking up.
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.
S&P 500 futures are trading at 6001 as of this writing. S&P 500 futures resistance levels are 6017, 6131, and 6256: support levels are 5926, 5748, and 5622.
DJIA futures are up 76 points.
Gold futures are at $2951, silver futures are at $32.40 and oil futures are at $70.14.
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.
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.
