By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Risk To Nvidia
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. NVDA is a very important stock for the overall market sentiment.
- The chart shows NVDA stock dipped below Zone 4 on the trade war between the U.S. and China heating up.
- The chart shows NVDA stock neared the bottom of the Arora buy zone for a trade around position. Trade around positions are a billionaire and hedge fund technique to maximize returns and minimize risks. Please see the Trade Management Guidelines to read more.
- The chart shows Arora signals to take partial profits on the trade around position on up spikes as NVDA stock rose to the top band of Zone 3.
- The chart shows NVDA stock subsequently pulled back.
- The chart shows NVDA stock is below Zone 3 as of this writing.
- The NVDA core position in the ZYX Buy Model Portfolio is long from $12.55. Hedges were in place before the big drop. After the drop, hedges became very profitable. The Arora Report has given signals to take partial profits on hedges.
- Dynamic hedging used by The Arora Report is one of the keys to high risk adjusted returns.
- There is a new challenge to Nvidia in AI chips from Huawei of China. In the early trade, the stock market is perceiving this as a risk for Nvidia. Huawei has a chip named Ascend 910D. This chip is reportedly more powerful than Nvidia’s H100 chip. Several Chinese companies are reportedly about to start testing this new chip.
- Huawei is already on track to ship about 8000 of the prior Ascend 910B and 910C chips.
- In The Arora Report analysis, there is no immediate negative impact for Nvidia. Here are the reasons:
- The Trump administration has already restricted Nvidia from selling advanced AI chips to China.
- Nvidia is already de-risked by taking a write off of over $5B for chips manufactured for China that can no longer be shipped to China because of current regulations.
- Huawei is still far behind Nvidia. Investors need to be aware that over a period of time Huawei may catch up to Nvidia.
- On the positive side, the stock market is expecting several trade deal announcements this week including potential deals with India, Japan, South Korea, and Australia.
- This week brings fresh economic data:
- JOLTS job openings and consumer confidence will be released tomorrow at 10am ET.
- ADP, the largest private payroll processor, will give its glimpse into the jobs picture on Wednesday at 8:15am ET.
- Personal income and spending, Q1 Advanced GDP and GDP Deflator, as well as PCE, the Fed’s favorite inflation gauge, will be released Wednesday at 8:30am ET.
- Initial jobless claims and ISM Manufacturing Index will be released Thursday at 8:30am ET.
- The mother of all reports, the jobs report, will be released Friday at 8:30am ET.
- A flood of earnings will be reported this week, including earnings from NXPI, PYPL, PFE, SOFI, CZR, MDLZ, QRVO, SNAP, SBUX, V, CAT, META, MSFT, MGM, QCOM, LLY, MCD, AMZN, and AAPL.
- In The Arora Report analysis, expectations from earnings are high. In totality, there is about a 70% probability that the companies will report earnings better than consensus.
- For the AI trade, especially important from earnings will be capital spend numbers from META, MSFT, and AMZN. META is expected to stay steadfast. There have been several rumors of AMZN and MSFT pulling back.
- As an actionable item, the sum total of the foregoing is in the Arora Protection Band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the Arora Protection Band. The Arora 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), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).
In the early trade, money flows are negative in Nvidia (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) 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. Smart money is an important indicator but is only one of hundreds of indicators that go into determining the Arora Protection Band and signals. Please click here and here to understand how signals are generated.
Very Very Short-Term Indicator
The Arora Report’s proprietary 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 *** in oil in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is seeing buying.
Markets
Interest rates are ticking up, and bonds are ticking down.
The dollar is range bound.
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 5551 as of this writing. S&P 500 futures resistance levels are 5622, 5748, and 5926: support levels are 5500, 5400, and 5256.
DJIA futures are up 92 points.
Gold futures are at $3306, silver futures are at $32.97, and oil futures are at $62.94.
Arora Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror. The proprietary Arora Protection Band from The Arora Report is very popular. The Arora 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.
