By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Formidable Stage Five
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 NVDA stock moved up after the release of earnings.
- Going into earnings, the whisper numbers for Nvidia were higher than the consensus. Nvidia earnings came inline with the whisper numbers. Stocks move based on the difference between whisper numbers and the reported numbers. Whisper numbers are the numbers analysts privately share with their best clients. Whisper numbers are often different consensus numbers that the same analysts publish for public consumption.
- Initially, NVDA stock moved up on the headlines, but then it fell on concern about margins. In the overnight session, dip buyers came in and aggressively bought NVDA stock, running the stock back up.
- The chart shows NVDA stock is now in the resistance zone.
- The chart shows the move up was not on low volume.
- In The Arora Report analysis, Nvidia earnings were excellent and the concern about margins is misplaced. Due to new product introduction, The Arora Report had expected lower margins. The reported margin is inline with our expectations.
- In The Arora Report analysis, the most important point from Nvidia’s conference call is that Nvidia has an aggressive new product map. If Nvidia executes this product map, Nvidia will further distance itself from AMD and custom AI chip makers Broadcom (AVGO) and Marvell (MRVL).
- As we have shared with you before, the real issue facing NVDA as a stock is that it is in the formidable stage five of the stages of a long trade. Please click here to see the five stages.
- The Arora Report core position in NVDA with an average price of $12.55 was established when NVDA was in stage one.
- The biggest losers from Nvidia earnings have been option players. Premiums on options were very expensive going into earnings as options were indicating a 10% move in NVDA stock after earnings. SInce Nvidia has had a muted move after earnings, most of those expensive options are now worthless.
- GDP is a lagging indicator, but nonetheless important because the market pays attention to it. The Arora Report focuses on leading indicators. Here are the details of the data:
- Q4 GDP Second Estimate came at 2.3% vs. 2.3% consensus.
- GDP Deflator Second Estimate came at 2.4% vs. 2.2% consensus.
- Initial jobless claims came at 242K vs. 220K consensus. In The Arora Report analysis, jobless claims are likely to rise further. Jobless claims is a leading indicator and carries heavy weight in the adaptive ZYX Asset Allocation Model with inputs in ten categories. At The Arora Report, we are carefully watching the impact of DOGE on unemployment. So far, the data indicates only 614 former federal civilian employees applying for unemployment. However, prudent investors should note that the data has a two week delay.
- Durable goods is mixed. Here are the details:
- Durable goods came at 3.1% vs. 1.8% consensus.
- Durable goods ex-transportation came at 0.0% vs. 0.4% consensus.
- Personal income, personal spending, and the Fed’s favorite inflation gauge PCE will be released tomorrow ato 8:30am ET.
- After the recent leap in quantum computing by Microsoft (MSFT), Amazon (AMZN) has had its own breakthrough. A team at California Institute of Technology has developed a new quantum computing chip Ocelot that can potentially reduce error correction cost by up to 90%. For those interested in next level information, listen to the podcast titled “QUANTUM COMPUTING MAY BE BIGGER THAN THE INTERNET – A GIANT LEAP PART 4” in Arora Ambassador Club.
- In quantum computing, whisper numbers were very high compared to the consensus for IonQ (IONQ). IONQ reported inline with the consensus. IONQ is also making a CEO transition, in addition to announcing a $500M at-the-market equity offering.
- 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.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Tesla (TSLA).
In the early trade, money flows are negative in Apple (AAPL).
In the early trade, money flows were positive in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ), but as of this writing in the premarket, they have turned negative.
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
Bitcoin (BTC.USD) is range bound.
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 5986 as of this writing. S&P 500 futures resistance levels are 6017, 6131, 6256: support levels are 5926, 5748, and 5622.
DJIA futures are down 42 points.
Gold futures are at $2902, silver futures are at $32.47, and oil futures are at $69.81.
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.
