By Nigam Arora
To gain an edge, this is what you need to know today.
AI Trade
Please click here for a chart of Snowflake stock (SNOW).
Note the following:
- The Morning Capsule is about the big picture. The chart of SNOW stock is being used to illustrate the point. Snowflake is important because its accelerating growth shows enterprise AI spending is broadening beyond chips and data centers into the software and data infrastructure layer.
- The chart shows SNOW is gapping up about 23% after good earnings.
- Snowflake earnings are better than whisper numbers and consensus numbers. Here are the details:
- Snowflake reported Q2 EPS of $0.62 vs. $0.45 consensus.
- Snowflake reported Q2 revenue of $1.55B vs. $1.48B consensus.
- Snowflake raises FY27 product revenue projection to $6.07B from $5.84B.
- As a full disclosure, The Arora Report members have a position in SNOW long from an average of $120. SNOW is trading at $378.20 as of this writing in the premarket, representing a gain of 215%.
- This morning is showing a sharp contrast between software stock SNOW and mostly a semiconductor stock Broadcom (AVGO). Broadcom has been a favorite of momo gurus. Broadcom reported strong earnings but lower than whisper numbers. Here are the details:
- Broadcom reported Q3 EPS of $3.32 vs. $3.24 consensus.
- Broadcom reported Q3 revenue of $29.6B vs. $29.43B consensus.
- Broadcom is raising FY26 revenue projection to $58B from $56B.
- Broadcom expects semiconductor demand to accelerate. Broadcom expects FY27 AI chip revenue of $100B and FY28 of $230B. In The Arora Report analysis, there is an important shift in market sentiment regarding semiconductors. If the same projections were given a while ago, AVGO stock would have been up significantly, but as of this writing in the premarket AVGO is down. Prudent investors should pay attention when sentiment shifts.
- As the morning has progressed, significant buying has come in the stock market for three reasons:
- The Japanese yen has strengthened without intervention.
- Yields are slipping.
- Fed Governor Waller said, “…recent data suggest we are finally seeing some signs of disinflation.”
- In The Arora Report analysis, after Waller’s comment, the next Consumer Price Index (CPI) release becomes even more critical. The next CPI release is on September 11 at 8:30am ET.
- Initial jobless claims came at 206K vs. 205K consensus, indicating the jobs picture is stable.
- ISM Non-Manufacturing Index will be released today at 10am ET and may be market moving.
- The jobs report will be released tomorrow at 8:30am ET and may be market moving.
- 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), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Tesla (TSLA).
In the early trade, money flows are neutral in Apple (AAPL).
In the early trade, money flows are positive in S&P 500 ETF (SPY) and mixed Nasdaq 100 ETF (QQQ).
Momo Crowd And Smart Money In Stocks
The momo crowd is buying stocks in the early trade. Smart money is inactive 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 positive. 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 buying 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 inactive in the early trade.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is like a yoyo in oil in the early trade. Smart money is inactive in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is seeing buying.
Markets
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.
S&P 500 futures are trading at 7698 as of this writing. S&P 500 futures resistance levels are 7700, 7831, and 7900 : support levels are 7318, 7194, and 7032.
DJIA futures are up 308 points.
Gold futures are at $4499, silver futures are at $67.07, and oil futures are at $91.96.
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 23% – 37% in cash, Treasury bills, short term fixed income, or allocated to short-term tactical trades; and short to medium-term hedges of 7% – 9%, and short term hedges of 5%. 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.
