By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Gamma Squeeze
Please click here for a chart of AMD stock (AMD).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of AMD is being used to illustrate the point.
- Gamma squeezes are taking place in many AI stocks, driving them higher.
- The chart shows a gamma squeeze is taking place in AMD. Gamma squeeze is an important market mechanic. The easiest and best way to understand gamma squeeze is to listen to the podcast titled “MARKET MECHANICS: IMPACT OF DEALERS’ GAMMA POSITION CHANGE ON THE STOCK MARKET.”
- RSI on the chart shows AMD has more room to run.
- The chart shows an upward sloping trendline on AMD.
- The chart shows the move up in AMD has accelerated away from the trendline.
- The most important point for prudent investors is that the gamma squeeze in AMD was triggered by investors who missed out on Nvidia (NVDA) and are reluctant to buy NVDA stock at this high price. These investors are now aggressively buying call options on AMD.
- There is extremely aggressive buying in Dell (DELL) on a comment that orders for AI servers increased by 40%.
- The momo crowd is buying DELL stock with the hope of DELL stock rocketing, just like Super Micro Computer (SMCI). The momo crowd ran up SMCI without understanding the fundamentals of the company.
- The fair value of SMCI is less than half of where the stock is trading as of this writing in the premarket. DELL reported good earnings but is not under valued where it is trading.
- Elon Musk was a co-founder of OpenAI. OpenAI is responsible for ChatGPT. Investment in OpenAI is also the centerpiece of Microsoft’s (MSFT) AI strategy. Musk is suing OpenAI for putting profits above humanity. OpenAI is a nonprofit organization. The suit says, “OpenAI Inc has been transformed into a closed-source, de facto subsidiary of the largest technology company in the world: Microsoft. Under its new board, it is not just developing but is actually refining an AGI to maximize profits for Microsoft, rather than for the benefit of humanity.”
- A major Wall Street bank has done the unthinkable. They downgraded Apple (AAPL). Not many dare to downgrade AAPL or even take a cautious view on AAPL stock. The reason is that AAPL is such a favorite with investors that any negative comments about AAPL hurt the revenues of whoever is making cautious comments. AAPL is a very large position in ZYX Buy Model Portfolio as it is long from $4.68. Nonetheless, The Arora Report has previously highlighted risks in AAPL stock. You can expect The Arora Report to be objective about AAPL as The Arora Report is solely dedicated to the long term benefit of its members. For more on risks in AAPL, please see previous Capsules, posts in ZYX Buy and ZYX Emerging, and the risk reward matrix in ZYX Buy.
- In Fed speak yesterday, Fed officials expressed cautious optimism about rate cuts. Fed President John Williams stated that he does not expect to further tighten policy. There is more Fed speak today.
- ISM Manufacturing Index will be released at 10am ET. Consensus is 49.5%. The data may be market moving.
- University of Michigan Consumer Sentiment will be released at 10am ET. Consensus is 79.6. The data may be market moving.
- Expect blind money to flow into the stock market today. Blind money is the money that pours into Wall Street on the first two days of the month without any analysis and irrespective of market conditions. Most of blind money is invested in the afternoon.
- Wall Street front runs the blind money by buying certain stocks in the morning and then selling them to blind money in the afternoon at a profit. Of course, blind money is oblivious because they do not care what price they pay.
- 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.
Magnificent Seven Money Flows
In the early trade, money flows are positive in NVDA.
In the early trade, money flows are neutral in MSFT, Amazon (AMZN), and Meta (META).
In the early trade, money flows are negative in AAPL, Alphabet (GOOG), and Tesla (TSLA).
In the early trade, money flows are mixed 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.
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 as investors wait for bitcoin whales’ move over the weekend. Bitcoin whales often move over the weekend, taking advantage of low liquidity to carry out their own profit generating plan.
Learn the secrets of bitcoin whales and how they move, so you can consistently generate profits from bitcoin. The best way to learn these secrets is to listen to the three part series “WHALES’ SECRETS YOU NEED TO KNOW: CAPTURING BITCOIN PROFITS” For those interested in access to this series, please email ambassador@thearorareport.com.
Markets
Our very, very short-term early stock market indicator is ***. Remember today is a Friday, and short squeezes tend to occur on Fridays. 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 and bonds are range bound.
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.
Gold futures are at $2059, silver futures are at $22.87, and oil futures are at $79.74.
S&P 500 futures are trading at 5102 as of this writing. S&P 500 futures resistance levels are 5210, 5400, and 5500 : support levels are 5020, 4918, and 4852.
DJIA futures are down 27 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.
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 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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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.
