By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Retail Sales Shocker
Please click here for a chart of Uber stock (UBER).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of UBER stock is being used to illustrate the point.
- The chart shows the jump up in UBER stock on the news of the buy back.
- The chart shows the Arora buy zone and the power of buy zones. UBER is long in the ZYX Buy Model Portfolio from $25.58. UBER is trading at $78.75 as of this writing in the premarket. This represents a profit of 208%.
- UBER is a prime example and a key reminder to investors that there are opportunities beyond the magnificent seven and AI. While the magnificent seven stocks and AI have been driving the stock market, there are opportunities for investors in less expensive stocks with better potential for risk adjusted returns. The magnificent seven stocks are Apple (AAPL), Amazon (AMZN), Alphabet (GOOG, GOOGL), Meta (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA).
- There is apparently a new serious national security threat. Read the section on Russia below.
- From a seasonality perspective, historically, the next two weeks tend to be weak in the stock market. It will be interesting to see if the AI frenzy trumps seasonality. In The Arora Report analysis, the main factor looking ahead is Nvidia earnings. Please see yesterday’s Morning Capsule for details.
- There is a new milestone in AI –Nvidia’s market cap is now higher than the market cap of Amazon and Alphabet.
- Weekly Initial Claims came at 212K vs. 221K consensus. In The Arora Report analysis, the jobs picture continues to be strong, especially at the low end. The jobs picture continues to be weak in IT.
- The U.S. economy is 70% consumer based. For this reason, prudent investors pay attention to retail sales. The consumer has been on a binge of excessive spending. Momo gurus have been predicting that the consumer will continue with excessive spending. At The Arora Report, we have been sharing with you that consumer liquidity is becoming less and will ultimately impact consumer spending. The just released data on retail sales is a shocker and shows that The Arora Report call is spot on. Here are the details of retail sales data:
- Headline retail sales came -0.8% vs. -0.2% consensus.
- Retail sales ex-auto came at -0.6% vs. 0.1% consensus.
- Producer Price Index (PPI) will be released tomorrow at 8:30am ET and may be market moving.
- The U.K. and Japan are on track to enter technical recessions. See the sections below. This set of data may cause prudent investors to rethink the case of no recession in the U.S. Historically, it is not uncommon for U.S. economic data to follow the U.K.’s economic data after a few months.
- 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.
Russia
Yesterday, the stock market briefly dipped when House Intelligence Committee Chairman Michael Turner warned of a serious new national security threat. He felt the threat was so serious that he asked President Biden to declassify the information about this threat.
The momo crowd, apparently oblivious to the report, aggressively bought the shallow dip.
At this time, it is not clear what the real threat is. It appears that Turner is talking about Russia experimenting with nuclear energy in space to disable U.S. satellites. The U.S. military is heavily dependent on satellites.
Japan
Japan’s flash Q4 GDP came at -0.1% quarter-over-quarter vs. 0.2% consensus. If the flash GDP is not revised upwards, Japan is on track to enter a technical recession.
U.K.
U.K. flash Q4 GDP came at -0.3% quarter-over-quarter vs. -0.1% consensus. If the flash GDP is not revised upwards, the U.K. is on track to enter a technical recession.
Layoffs
Networking giant Cisco (CSCO) is laying off several thousand people due to slower demand.
Among financial firms, Morgan Stanley (MS) is laying off several hundred people.
Magnificent Seven Money Flows
In the early trade, money flows are positive in META, MSFT, and TSLA.
In the early trade, money flows are neutral in AMZN and NVDA.
In the early trade, money flows are negative in AAPL and GOOG.
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 *** in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is now over $52,000. Bitcoin memes believe that bitcoin whales are set to drive bitcoin to $65,000.
There is aggressive buying in bitcoin miners.
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 down, and bonds are ticking up.
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.
Gold futures are at $2010, silver futures are at $22.76, and oil futures are at $76.16.
S&P 500 futures are trading at 5028 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 up 85 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.
