By Nigam Arora
To gain an edge, this is what you need to know today.
Samsung Warning
Please click here for a chart of leveraged semiconductor ETF (SOXL).
Note the following:
- Semiconductors are the leading sector that has been driving the stock market higher. SOXL is the momo crowd’s favorite semiconductor ETF.
- The chart shows that yesterday investors were buying SOXL, but SOXL was not able to hold its gain.
- We shared with you in the Morning Capsule yesterday that buying in semiconductors in the U.S. was mostly the momo crowd buying in anticipation of good Samsung (SSNLF) earnings.
- The chart shows the fall in SOXL in the early trade this morning after Samsung earnings.
- The chart shows SOXL is now in zone 2 (support).
- Prudent investors should carefully watch the following:
- How SOXL behaves after the initial selling
- Does SOXL hold zone 2 or move above zone 2
- Volume of SOXL today
- Price action in Micron (MU), Sandisk (SNDK), and memory ETF (DRAM)
- As we have been sharing with you, lately the U.S. stock market has been following the South Korean stock market. Historically, the South Korean stock market followed the U.S. stock market. The South Korean stock market fell after Samsung earnings, and the selling in South Korea carried over to the U.S.
- Samsung earnings are outstanding and way above consensus. Here are the details:
- Q2 preliminary operating profit came at KRW 89.4T vs. KRW 84.2T consensus. This is a 56% jump from the previous quarter and a 1900% jump from the same quarter a year earlier.
- Q2 preliminary revenue came at KRW 171.0T vs. KRW 162.2T consensus. Revenue has doubled from the prior year.
- In spite of outstanding earnings significantly beating consensus, SSNLF stock fell 6.9% in South Korea. KOSPI Composite, the benchmark for South Korean stocks, fell 4.9%.
- Many investors are puzzled as to why SSNLF stock fell after Samsung reported outstanding earnings. As a member of The Arora Report, you were already ahead of the curve. The reason for the fall is that even the outstanding numbers from Samsung did not meet the whisper numbers. Many investors, especially retail investors rely on consensus numbers and do not understand that stocks move on the difference between the reported numbers and the whisper numbers. Whisper numbers are the numbers that analysts privately provide only to their best clients. These numbers are often different from the numbers the same analysts publish for public consumption.
- After the momo crowd bought semiconductor stocks aggressively ahead of Samsung earnings without any consideration of risk, this morning, the momo crowd is aggressively selling semiconductor stocks. Momo crowd selling is exaggerating the downmove in tech stocks far more than is justified for Samsung’s earnings.
- Adding to the negative sentiment this morning is that DeepSeek, a leading Chinese LLM developer, is developing its own AI chip to reduce dependence on Nvidia (NVDA). The chip is designed for inference, not training.
- Amazon (AMZN) is entering the AI debt binge by offering $25B in bonds. The debt is being sold in eight tranches from 3 – 40 years.
- We previously shared with you The Arora Report analysis that one of the potential failure points in the AI rally is the debt binge that is not financed by banks but by private investors. This is one of the reasons prudent investors should pay attention to the Arora Protection Band.
- SpaceX (SPCX) is joining Nasdaq 100 today. Wall Street banks are issuing very bullish targets, with one setting a target of $800 for SPCX. The analyst behind the $800 price target is estimating the long term opportunity for SPCX to be $30T – this is far in excess of prior estimates from most analysts including The Arora Report.
- 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
Most portfolios are now heavily concentrated in the Mag 7 stocks. For this reason, to get ahead and get an edge, investors need to dig below the surface of the Mag 7 stocks. It is equally important to rise above the noise of daily news on the Mag 7 stocks. The best way to get an edge, dig below the surface, and rise above the noise of the daily news is to pay attention to early money flows in the Mag 7 stocks on a daily basis. When there is significant news in the Mag 7 stocks that rises above the threshold of noise and impacts your entire portfolio, it is covered in the main section above.
In the early trade, money flows are positive in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Apple (AAPL).
In the early trade, money flows are negative in Nvidia (NVDA) and Tesla (TSLA).
In the early trade, money flows are negative 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. This is reflected in gold ETF (GLD), silver ETF (SLV), gold miner ETF (GDX), and silver miner ETF (SIL). Smart money is *** in the early trade.
For longer-term, please see gold and silver ratings.
Oil
Iran has fired missiles at two ships in the Strait of Hormuz. Iran appears to be taking advantage of President Trump’s desire to not escalate before the midterm elections.
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.
Markets
Interest rates and bonds are range bond.
The dollar is range bound.
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 7585 as of this writing. S&P 500 futures resistance levels are 7700, 7900, and 8000 : support levels are 7318, 7194, and 7032.
DJIA futures are up 237 points.
Gold futures are at $4178, silver futures are at $61.89, and oil futures are at $69.31.
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.
