By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Spending Disappointment
Please click here for a chart of Super Micro Computer stock (SMCI).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of SMCI stock is being used to illustrate the point.
- A fortune is to be made in artificial intelligence, but it is not going to be in a straight line. At times, it is going to be treacherous. It is important to not make mistakes by getting carried away with the momo crowd and listening to momo gurus who have a vested interest that is not your best interest.
- The chart shows that momo crowd favorite SMCI fell yesterday on the news of a Department of Justice (DOJ) probe due to allegations of accounting irregularities. A DOJ probe is a serious matter as it is often a criminal probe.
- The chart shows that the enthusiasm was at its peak right after SMCI stock was added to S&P 500.
- The chart shows from the peak to the low, the stock lost 69% of its value.
- The chart shows that the day S&P 500 added SMCI stock, The Arora Report made a bold call. The Arora Report call was that SMCI was worth only $442 – $486 in the best case. The stock peaked at $1229. As of this writing in the premarket, SMCI stock is trading at $400.95. All Arora Report calls are 100% transparent, traceable, and auditable. Members have access to over ten years of archives, including the winners and losers – no cherry picking.
- Right now, the momo crowd is sitting on massive losses in SMCI stock. The momo crowd was not able to distinguish between Nvidia (NVDA) and Super Micro Computer – the prevailing belief among the momo crowd was that NVDA and SMCI were the same.
- The U.S. economy is 70% consumer based. For this reason, prudent investors pay attention to personal income and personal spending. Just released personal income and spending data is disappointing. Here are the details of the new personal income and spending data:
- Personal income came at 0.2% vs. 0.4% consensus.
- Personal spending came at 0.2% vs. 0.3% consensus.
- PCE is the Fed’s favorite inflation gauge. Here are the details:
- PCE came at 0.1% vs. 0.1% consensus.
- Core PCE came at 0.1% vs. 0.2% consensus.
- In The Arora Report analysis, the data is in line with expectations. As such, this data should have no impact on the stock market.
- Even though the stock market pays a lot of attention to PCE, in The Arora Report analysis, economists have become really good at projecting PCE. As such investors expectations, in general, should be that PCE will come in line with consensus.
- 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. The protection band is one of the large number of unique edges that are available to members of The Arora Report.
Japan
Bank of Japan (BOJ) actions are very important for U.S. investors. The reason is the carry trade. In carry trade, funds borrow in yen and invest in the U.S. stock market. Lately, they have been buying AI stocks. Japan’s ruling party LDP has chosen Shigeru Ishiba as its new leader. Ishiba is the next prime minister of Japan. In The Arora Report analysis, yen is rallying on the news as Ishiba is a supporter of BOJ.
In The Arora Report analysis, this development is negative for the carry trade and positive for the yen position using ETF FXY in ZYX Allocation.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Apple (AAPL), Alphabet (GOOG), Microsoft (MSFT), and Tesla (TSLA).
In the early trade, money flows are neutral in Amazon (AMZN), Meta (META), and NVDA.
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.
Gold
The momo crowd is *** in 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 oil in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is on track to have the best September ever.
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 $2691, silver futures are at $32.34, and oil futures are at $67.59.
S&P 500 futures are trading at 5813 as of this writing. S&P 500 futures resistance levels are 5926 and 6017: support levels are 5748, 5622, and 5500.
DJIA futures are up 86 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.
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.
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.
