POWELL RALLY VANISHES, QUALCOMM HEIGHTENS APPLE CONCERN, MOTHER OF ALL REPORTS AHEAD

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By Nigam Arora & Dr. Natasha Arora

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

Key Events Ahead

Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).

Note the following:

  • The chart shows the steep rally that started on Powell’s press conference.
  • In yesterday’s Morning Capsule we wrote:

If political Powell shows up, expect a rip roaring rally.

  • Three groups of investors were buying.
    • Investors driven by macro bought on the belief that Powell gave an all clear signal for buying stocks.
    • Investors who follow traditional technical analysis aggressively bought because a technical buy signal triggered.
    • The momo crowd was buying because dovish Powell showed up.
  • The chart shows that at the peak of the rally when buying was very aggressive, The Arora Report took a contrary view and wrote in the Afternoon Capsule:

In The Arora Report analysis, there may be a re-think of the stock market rally as Powell was not able to support his dovishness with data or compelling argument.

  • The chart shows that The Arora Report call has proven prescient as all of the stock market rally was given back.
  • The Arora Report members benefited from this prescient call because they were not buying at the high just to find their new buys quickly turn to losses.
  • Two key events are ahead:
    • Apple (AAPL) earnings
    • Jobs report, also known as the mother of all reports
  • The momo crowd’s pattern is to buy ahead of key events.  The reason is that the momo crowd buys on hopium and does not take risk into account. Today is no different.  The momo crowd is aggressively buying ahead of Apple earnings and the mother of all reports.   In contrast, smart money knows that key events present risk.  To reduce risk, smart money tends to trim ahead of key events.
  • Apple will report earnings after the market close.  Here are the key points:
    • Analysts expect about a 5% drop in Apple revenues.
    • If analysts are right, this will be the fifth of the last six quarters with a drop in Apple revenues.
    • We have been sharing with you the problems Apple is facing in China.
    • Qualcomm (QCOM) owns patents on key technologies that power today’s smartphones, including iPhones. QCOM is in the ZYX Buy Model Portfolio.  Members of The Arora Report have a gain of 270% on QCOM.  Apple is a key Qualcomm customer.  QCOM data shows that it generated great revenues in China.  The implication here is that other companies such as Huawei are taking significant market share from Apple as Chinese switch away from iPhones.  
    • AAPL is in the ZYX Buy Model Portfolio.  AAPL is long from $4.68.  The Arora Report members have a gain of 3,573%.
    • Apple earnings are very important.  Risks to Apple are also very important.  Institutions are selling AAPL stock.  It is important to become knowledgeable about Apple.  Consider reading prior Morning Capsules and a recent detailed post on Apple in ZYX Buy.  For those who want next-level knowledge, the recent two-part podcast series titled “MAXIMIZING RISK ADJUSTED RETURNS FROM AI IPHONE OPPORTUNITY” has won wide acclaim.  For access to this series, write to ambassador@thearorareport.com.
  • The jobs report will be released at 8:30am ET tomorrow.
  • Initial jobless claims came at 208K vs. 213K consensus.  This indicates that the employment picture remains strong.
  • Q1 Productivity-Prel came at 0.3% vs. 0.8% consensus.   This indicates that AI has not become as pervasive in the workplace as some prior data indicated.
  • Q1 unit labor costs-Prel came at 4.7% vs. 2.5% consensus.  This indicates that taming inflation is a challenge.
  • 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.
See also  MAKE OR BREAK MOMENT FOR AI FRENZY AHEAD – NVIDIA EARNINGS, HOPES DASHED IN U.K.

Magnificent Seven Money Flows

In the early trade, money flows are positive in AAPL, Amazon (AMZN), Meta (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA).

In the early trade, money flows are neutral in Alphabet (GOOG).

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.

Gold

As we are ready to publish this post, all of a sudden, significant selling is coming in 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

As we are ready to publish this post, all of a sudden, significant selling is coming in 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 seeing buying on dovish Powell.

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 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.

See also  WEEKLY STOCK MARKET DIGEST: PRUDENT INVESTORS PAY ATTENTION TO CHANGE IN REACTIONS IN THE STOCK MARKET

Gold futures are at $2303, silver futures are at $26.32, and oil futures are at $79.07.

S&P 500 futures are trading at 5080 as of this writing.  S&P 500 futures resistance levels are 5210, 5256, and 5400: support levels are 5020, 4918, and 4852

DJIA futures are up 175 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.

See also  STOCK MARKET CELEBRATES COOLER CPI, OIL GLUT BY THE END OF THE DECADE

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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This post was just published on ZYX Buy Change Alert.

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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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