By Nigam Arora & Dr. Natasha Arora
Gurus Likely Wrong
Please click here for a chart of Home Depot (HD).
Note the following:
- The Morning Capsule is about the big picture and not about individual stocks.
- The chart of HD is simply being used to illustrate the bigger point.
- The chart shows when HD reported earnings.
- HD earnings were better than the consensus and whisper numbers.
- The way the positioning is in HD stock, on these earnings, the stock should have gone up. The chart shows the stock has fallen on the earnings in the pre-market.
- The reason for the fall in HD stock is that there are signs of pull-forward demand. In plain English, this means that the pandemic fueled demand for home renovations has pulled demand from future renovations.
- We have previously written that the stock market gurus were likely wrong in their earnings models as they have been projecting future earnings without considering pull-forward demand in their models.
- The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.
- The VUD indicator shows the supply of HD stock post-earnings.
- The stock market is not rational. The momo crowd buys the tiniest dip. The tell for investors will be if the momo crowd steps in and runs up HD stock from here.
Retail Sales
The foregoing is also confirmed on a broader scale by the Retail Sales data that was released at 8:30 am ET.
Retail Sales came at -1.1% vs. -0.2% consensus.
Retail Sales Ex-auto came at -0.4% vs. +0.2% consensus.
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 🔒.
Gold
The momo crowd is 🔒 gold in the early trade. Smart money is 🔒.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd 🔒 oil in the early trade. Smart money is 🔒.
For longer-term, please see oil ratings.
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 $1790, silver futures are at $23.74, and oil futures are $66.98
S&P 500 futures resistance levels are 4460, 4600, and 4900: support levels are 4400, 4318, and 4200.
DJIA futures are up/down 235 points.
Protection Bands and What To Do Now?
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold existing positions. Based on individual risk preference, consider holding 🔒 in cash or treasury bills or short-term bond funds 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.
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This post was just published on ZYX Buy Change Alert.
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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.
