By Nigam Arora
To gain an edge, this is what you need to know today.
Extreme Positive Sentiment
Please click here for a chart of Figma stock (FIG).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of FIG stock is being used to illustrate the point.
- The chart shows Figma’s IPO on July 31. The IPO was priced at $33.
- The chart shows the FIG stock reached its all time high of $142.92 on the second day of trading.
- The chart shows the fall in FIG stock since its all time high.
- The chart shows the drop after Figma reported earnings yesterday. Figma earnings were below whisper numbers. FIG stock is down 14.23%, trading at $58.50 as of this writing in the premarket.
- Figma earnings and the chart show the enthusiasm for IPOs is overdone. In The Arora Report analysis, enthusiasm for IPOs is a symptom of extreme positive sentiment and high liquidity.
- Liquidity is about to go even higher if the Fed cuts interest rates.
- Liquidity is also increasing on government borrowing and spending.
- As another example of over enthusiasm, the popular software company Salesforce (CRM) reported earnings below whisper numbers. CRM stock is down 6.11%, trading at $240.73 as of this writing in the premarket. Salesforce is receiving only middling success with its Agentforce. As we shared with you in yesterday’s Morning Capsule, even Salesforce itself has replaced 4,000 customer service employees with AI. Salesforce is not yet generating revenues at a high rate from AI like other software companies such as Microsoft (MSFT).
- JOLTS job openings released yesterday came at 7.181M vs. 7.38M consensus. Unemployment came at 7.24M. Job seekers now exceed the number of job openings. This is a first since April 2021. The data provides fuel for the Fed to cut rates at the September meeting.
- In a sign of the times, in spite of President Trump’s “drill baby drill,” major oil company ConocoPhillips (COP) is going to lay off 25% of its workforce.
- ADP is the largest private payroll processor in the country. ADP uses its data to provide a glimpse of the jobs pictures ahead of the official jobs report. The just released ADP data shows that the jobs picture is weakening. ADP Employment Change came at 54K vs. 69K consensus.
- Initial jobless claims came at 237K vs. 232K consensus. This data shows the jobs picture is staying strong. This also illustrates the crosscurrents and conflicts between various pieces of data. At this time, it is very important that investors have access to reliable objective sources of analysis with long track records like The Arora Report. It is important to not depend on momo gurus, especially in view of the conflicting data – momo gurus exaggerate the positive data and ignore the negative data in the pursuit of their job to run up the stock market.
- ISM Services data will be released at 10am ET and may be market moving.
- The mother of all reports, the official jobs report will be released tomorrow at 8:30am ET.
- Of special importance to the AI trade will be earnings from Broadcom (AVGO) to be released after the regular session close.
- President Trump is going to the Supreme Court in an effort to overturn the appeals court decision on tariffs. In The Arora Report analysis, the probability is high that the Supreme Court will rule in favor of President Trump. Further, in The Arora Report analysis, even if the Supreme Court does not rule in President Trump’s favor, there are many other alternatives available to President Trump to keep tariffs in place.
- The data has clearly indicated that it is time for investors to be judicious and not blindly chase momentum.
- 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 positive in Amazon (AMZN), Meta (META), and Tesla (TSLA).
In the early trade, money flows are neutral in Nvidia (NVDA) and Microsoft (MSFT).
In the early trade, money flows are negative in Apple (AAPL) and 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.
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
India bought 39 tonnes of gold and reduced U.S. Treasury holdings from $242B to $227B.
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 build of 0.622M barrels vs. a consensus of a draw of 3.4M barrels.
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.
Markets
Interest rates are ticking down, and bonds are ticking up.
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.
S&P 500 futures are trading at 6462 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 9 points.
Gold futures are at $3607, silver futures are at $41.53, and oil futures are at $63.19.
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.
