MAKE OR BREAK MOMENT FOR AI FRENZY AHEAD – NVIDIA EARNINGS, HOPES DASHED IN U.K.

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By Nigam Arora & Dr. Natasha Arora

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

Make Or Break Moment

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.
  • NVDA is the most important stock in the market as Nvidia is the epicenter of the AI revolution.
  • The chart shows NVDA has been consolidating.
  • The chart shows that members of The Arora Report were able to buy NVDA at $125.51 right before the run up started.  Members of The Arora Report now have a gain of 660%.
  • The chart shows subsequent Arora calls on NVDA have been spot on.  NVDA is in the ZYX Buy core Model Portfolio.  For those not in NVDA stock, consider waiting for a new signal on The Arora Report ZYX Buy Real Time Feed with a buy zone for those following the Best Way and a Buy Now rating for those following the Good Way.  New members, please see the Getting A Running Start Guide for more.
  • NVDA will report earnings after the market close today.  Here are the key points:
    • A move of about 7% is expected in either direction.
    • Before the prior set of earnings, on the average a move of 13% in either direction was expected.
    • In The Arora Report analysis, NVDA is likely to beat the consensus numbers.
    • In The Arora Report analysis, the key question is if NVDA will beat the whisper numbers. Whisper numbers are much higher than the consensus numbers.  Whisper numbers are numbers that analysts make available only to their best clients and are not publicly available. 
    • In The Arora Report analysis, another key point will be product transition to Blackwell.  For example, Amazon (AMZN) has stopped buying NVDA GPUs as it waits for Blackwell.  
  • NVDA earnings will dictate not only the future course of AI stocks but also the entire stock market.
  • There are two earnings of note for investors this morning.
    • Analog Devices (ADI), a major analog semiconductor company, reported earnings better than whisper numbers.  The stock is rising about 6% in the premarket.  ADI is long from $83.25.  It is trading at $228.22 as of this writing in the premarket, providing a gain of 174% for members of The Arora Report.  For those not in ADI, see the Buy Now rating, buy zone, target zone, and recommended quantity in the ZYX Buy core Model Portfolio.
    • Target (TGT) reported earnings less than whisper numbers.  TGT stock is down about 10% as of this writing in the premarket.  TGT is losing share to Walmart (WMT).  WMT is in the ZYX Buy core Model Portfolio.
  • FOMC meeting minutes will be released at 2pm ET and may be market moving. 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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Hopes Dashed In The U.K. 

Historically, the data in the U.K. precedes the U.S.  For this reason, prudent investors pay attention to U.K. data to gain an edge.  

The momo crowd has been aggressively buying U.K. stocks on their belief of a certainty of a rate cut in June.

This morning, those hopes appear to be dashed on hotter inflation data.  Here are the details:

  • Headline CPI  came at 0.3% vs. 0.2% consensus.
  • Core CPI came at 0.9% vs. 0.7% consensus.

Magnificent Seven Money Flows

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

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

In the early trade, money flows are negative in Alphabet (GOOG) and Tesla (TSLA).

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.

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, very short term trades, consider following the momo crowd and not smart money.

Gold

The momo crowd is *** gold in the early trade.  Smart money is *** in the early trade.

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For longer-term, please see gold and silver ratings.

Oil

The momo crowd is *** 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 as exuberance about a potential ether ETF continues.

Markets

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 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.

Gold futures are at $2414, silver futures are at $31.92, and oil futures are at $77.76.

S&P 500 futures are trading at 5337 as of this writing.  S&P 500 futures resistance levels are 5400, 5500, and 5622: support levels are 5256, 5210, and 5020.

DJIA futures are down 90 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.

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.

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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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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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