By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Smart Money Sells Retail Favorites
Please click here for a chart of Palantir stock (PLTR).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of PLTR stock is being used to illustrate the point.
- The chart shows smart money selling in PLTR stock.
- The chart shows PLTR stock has given up the gains since the last earnings report.
- The volume on the chart shows the drop yesterday was on heavier volume.
- The chart shows PLTR stock is near the top band of zone 1 (support).
- The chart shows PLTR stock has returned to the trendline. A definitive drop below the trendline would be a negative.
- PLTR is in the ZYX Buy Core Model Portfolio long from $20.15. Even after the pullback, this represents a gain of 660%.
- As PLTR stock has dropped, investors also need to remember that PLTR stock has a path to become a $1T company.
- The chart shows the prior Arora buy zone for PLTR stock which helped newer members buy PLTR during the last dip.
- We previously wrote in ZYX Buy:
A raging bull market like we are in now sustains a high valuation, but if a bear market develops, a high valuation stock, such as PLTR, can be cut in half.
- Members of The Arora Report are ahead of the curve – The Arora Report shared with you on August 4 that RSI on the PLTR chart showed divergence. That divergence foretold the drop.
- RSI on the chart shows that PLTR stock is now oversold. Oversold stocks tend to bounce.
- Prominent among the favorite stocks of retail investors that smart money was selling yesterday are PLTR, Strategy (MSTR), IonQ (IONQ), Rocket Lab (RKLB), AST SpaceMobile (ASTS), Advanced Micro Devices (AMD), and Hims & Hers Health (HIMS).
- In The Arora Report analysis, smart money sold retail favorite stocks yesterday for two reasons:
- Smart money is increasing protection ahead of Fed Chair Powell’s Jackson Hole speech on Friday. Smart money always controls risks. In contrast, the momo crowd almost never takes risk into account and is fixated on rewards.
- Smart money recognizes that the sentiment in the favorite stocks of retail investors is extremely positive. As we have been sharing with you, extremely positive sentiment is a contrary indicator.
- There is a Treasury auction of 20 year bonds today. The offering amount is $16B. The auction results may be market moving, especially if the auction does not go well.
- The FOMC minutes will be released today at 2pm ET and may be market moving.
- Among important earnings this morning, Target (TGT) reported below whisper numbers and appointed a new CEO. Off-price retailer TJX (TJX) reported above whisper numbers. Analog semiconductor company Analog Devices (ADI) reported above whisper numbers. Home improvement retailer Lowe’s (LOW) reported above whisper numbers. LOW and ADI are in the ZYX Buy Core Model Portfolio.
- 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 neutral in Microsoft (MSFT) and Nvidia (NVDA).
In the early trade, money flows are negative in Amazon (AMZN), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).
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
API crude inventories came at a draw of 2.4M barrels vs. a consensus of a draw of 1.2M barrels. The API data is bullish for oil. However, in the longer term, the driving force for oil is the potential change in sanctions against Russian 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) continues to see selling after Treasury Secretary Bessent’s comment that the U.S. will not be adding more bitcoins to the reserve. However, Bessent has been trying to backtrack his comment after bitcoin started falling.
Markets
Interest rates are ticking up, and bonds are ticking down.
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 6425 as of this writing. S&P 500 futures resistance levels are 6500, 6700, and 7000 : support levels are 6256, 6131, and 6017.
DJIA futures are down 6 points.
Gold futures are at $3386, silver futures are at $37.59, and oil futures are at $62.51.
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.
