By Nigam Arora
To gain an edge, this is what you need to know today.
Blowout Jobs Report
Please click here for a chart of the leveraged semiconductor ETF (SOXL).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of the leveraged semiconductor ETF SOXL is being used to illustrate the point.
- Semiconductor mania is one of the three manias driving the stock market higher. Semiconductor mania has been the main factor driving the stock market higher.
- The chart shows a drop in SOXL after Broadcom (AVGO) earnings came well below whisper numbers. Please see yesterday’s Morning Capsule for details.
- The chart shows extremely aggressive buying by the momo crowd on the dip in semiconductors. After a sector has run up and a leading company in that sector disappoints, the kind of aggressive buying shown on the chart is unprecedented. The momo crowd just did not care about earnings. To the momo crowd, every dip is a buying opportunity, especially in semiconductors.
- The chart shows that extremely aggressive momo crowd buying led SOXL to recover most of the losses after AVGO earnings.
- Investors in Asia were not swayed by the momo crowd’s extremely aggressive buying in semiconductors.
- The chart shows SOXL started dropping after the regular session yesterday, after indications emerged that there would be selling in Taiwan and Korea. The chart shows that as Taiwan and Korea started trading lower, more selling came into SOXL after hours.
- Taiwan and South Korea are two markets that have been extremely strong. Taiwan Semiconductor Manufacturing Company (TSM) manufactures the most advanced AI semiconductors in Taiwan. Two big semiconductor memory makers, Samsung Electronics (SSNLF) and SK Hynix (HXSCL), are based in South Korea. The stock market in South Korea fell by 5.4% overnight. The Taiwan stock market fell by 1.33%. Korea ETF EWY is long from $48.60 in ZYX Emerging. It is trading at $191.12 in the premarket as of this writing. This represents a gain of 293%.
- There is a big setback for SPCX. S&P has decided not to fast-track the inclusion of SPCX in the S&P 500 after NASDAQ fast-tracked SPCX into the NASDAQ 100. The speculation was that the S&P 500 would do the same. This is a big setback because inclusion in the S&P 500 would have brought in blind money to buy huge quantities of SPCX without considering price or performing any analysis. To make matters worse, Wall Street would have front-run the inclusion by buying SPCX in advance, causing the SPCX price to go even higher. Then Wall Street would have sold SPCX at super-elevated prices to index funds. Passive fund managers do not care about the price they pay because their mandate is to buy whatever is included in the index, and, of course, it is not their money. The money in the funds comes from other investors, but those investors do not care about the price they pay because they drank the Kool-Aid that they must invest blindly because they do not have the intellect to learn the stock market and make good judgments that lead to better returns. For those interested in next level knowledge of the impact on SpaceX, there is a podcast in the Arora Ambassador Club.
- The Jobs Report is a blowout. Here are the details:
- Headlines nonfarm payrolls came at 178K vs 196K consensus.
- Private nonfarm payrolls came at 120K vs 89K consensus.
- Average hourly came at 0.3% vs 0.3% consensus.
- Unemployment came at 4.3% vs 4.3% consensus.
- In The Arora Report analysis after this Jobs Report, now the probability of a rate cut in Kevin Warsh’s first FOMC meeting is only 10%. The speculation has been that Kevin Warsh would manage to get a rate cut to appease President Trump, even though the data does not support it.
- In The Arora Report analysis, the probability of a rate hike this year is 60%.
- 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 Tesla (TSLA), Apple (AAPL), and Microsoft (MSFT).
In the early trade, money flows are negative in Amazon (AMZN), Nvidia (NVDA), Alphabet (GOOG), and Meta (META).
In the early trade, money flows are negative in S&P 500 ETF (SPY) and in 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 *** stocks 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 *** gold in the early trade.
For longer-term, please see gold and silver ratings.
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 range bound.
Markets
Interest rates are ticking up, and bonds are 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.
S&P 500 futures are trading at 7554 as of this writing. S&P 500 futures resistance levels are: support levels are 7700, 7900, and 8000: support levels are 7318, 7194, and 7032.
DJIA futures are up 67 points.
Gold futures are at $4471, silver futures are at $72.67, and oil futures are at $92.68.
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.
To take a free 30-day trial to paid services to gain access to more opportunities, please click here.
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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.
