By Nigam Arora & Dr. Natasha Arora

Weekly Digest from The Arora Report is popular among serious investors and money managers because they have found studying insights from the prior week gives them an edge over the coming weeks. Here is the day by day rundown from the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers of The Arora Report. 

Please scroll down for the section ‘Protection Bands and What To Do Now.’

RENEWED AI FRENZY LEADS MARKET TO NEW HIGH OVERSHADOWING NEGATIVES

February 23, 2024

To gain an edge, this is what you need to know today.

Renewed AI Frenzy

Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).

Note the following:

• The chart shows that the stock market hit a new high.
• The new stock market high has been triggered by renewed AI frenzy after Nvidia (NVDA) earnings.  The value of NVDA stock surged by a record $277B in one day.
• NVDA earnings sparked not only buying in the U.S. but also in stock markets across the globe.
• RSI on the chart shows that the stock market has room to run up.
• The chart shows a gap up on volume that was not heavy.  This indicates lack of conviction.
• The AI frenzy is overshadowing all of the negatives.  The two major negatives are the following:
  • Interest rates are likely to stay higher for longer.
  • Outside of AI, Wall Street’s earnings estimates are too high.
• In The Arora Report analysis, the probability is only about 30% of a Fed rate cut in May.  
• This morning in the early trade, the stock market is calm after yesterday’s rip roaring rally on NVDA earnings.
• 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.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Meta (META), Microsoft (MSFT), and NVDA.

In the early trade, money flows are neutral in Apple (AAPL) and Alphabet (GOOG).

In the early trade, money flows are negative in Amazon (AMZN) and Tesla (TSLA).

In the early trade, money flows are mixed 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.

Gold

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

The momo crowd is *** oil in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

We wrote in yesterday’s Morning Capsule:

There is speculation that bitcoin may see some selling as investors sell bitcoin to buy NVDA.

This is exactly what is happening today as bitcoin (BTC.USD) is seeing some selling.

Markets

Our very, very short-term early stock market indicator is ***.  Remember today is a Friday, and short squeezes tend to occur on Fridays.  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 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.

Gold futures are at $,2038 silver futures are at $22.81, and oil futures are at $77.22.

S&P 500 futures are trading at 5103 as of this writing.  S&P 500 futures resistance levels are 5210, 5400, and 5500 : support levels are 5020, 4918, and 4852.

DJIA futures are up 43 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.

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 seven 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.

NVIDIA DECLARES AI TIPPING POINT, GREAT AI INFERENCE SURPRISE, JAPAN’S NIKKEI 225 CROSSES 34 YEAR HIGH

February 22, 2024

To gain an edge, this is what you need to know today.

Artificial Intelligence Tipping Point

Please click here for a chart of Nvidia stock (NVDA).

Note the following:

• The Morning Capsule is about the big picture, not an individual stock.  The chart of NVDA stock is being used to illustrate the point.
• The chart shows when NVDA pulled back on extreme positioning prior to the earnings release.  Please read yesterday’s Morning Capsule for details.
• The chart shows NVDA fell below the trendline prior to the release of earnings, triggering many sell signals in traditional technical analysis.  This is a perfect illustration as to why it is important to not depend only on traditional technical analysis.  Investors should use a sophisticated system such as ZYX Change Method with six comprehensive screens.  Please click here to see the six screens of the ZYX Change Method.
• The chart shows the jump up after the earnings release after hours yesterday.
• Nvidia beat earnings. Here are the details:
  • NVDA beat whisper numbers.  Revenue came at $22.1B vs. $22B whisper number.  Earnings are at $5.16 vs. $5 whisper number.   As we have written before, whisper numbers were much higher than consensus.
  • For the current quarter, NVDA is forecasting $24B at the midpoint vs. $22.2B consensus.
  • Data center results were higher due to demand for Nvidia GPUs for generative AI.
  • Hyperscalers accounted for more than half the data center revenue.
• In The Arora Report analysis, there is a great surprise in NVDA earnings that demands investors’ attention.  
  • AI inference shipments were about 40% of AI related shipments.  
  • The consensus for AI inference shipments was 5%.  
  • In plain English, AI inference means AI trained models are actually being used.
  • AI inference correlates with revenue generation.  In contrast, AI training correlates to capital spend.
• In The Arora Report analysis, the inference shipment data indicates that AI is being adopted much faster than anybody anticipated before yesterday evening.
• In The Arora Report analysis, if the competition does not heat up, NVDA is on track to achieve $45 – $50 in earnings in 2027.  If this comes true, on this basis, NVDA is the cheapest tech stock.  Of course the reality is that competition will heat up.  Nonetheless, investors need to be aware that based on the current trajectory, NVDA is not an expensive stock.
• A fortune is to be made in artificial intelligence over the next six years.  However, it will not be a straight line.  Many investors will lose their shirts. It is imperative that investors rapidly increase their investing knowledge about AI.  The big problem investors face is that everyone has their own agenda.  It is extremely difficult to find objective knowledge that helps investors.  The easiest way to build your AI investing knowledge is to listen to the podcasts in Arora Ambassador Club.  To join the waitlist to become a club member, please fill out the form below. [gh_form id=”11″]
• Nvidia earnings are overshadowing everything else.
• 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.

FOMC Minutes

The FOMC minutes were hawkish and do not support momo gurus’ narrative of near term rate cuts.  Expect momo gurus to come up with a new narrative to run up the stock market.  Keep in mind that momo gurus’ real job is to persuade their followers to buy stocks under the disguise of analysis.

Jobless Claims

Initial claims is a leading indicator and carries heavy weight in our adaptive ZYX Asset Allocation Model with inputs in ten categories.  In plain English, adaptiveness means that the model changes itself with market conditions.  Please click here to see how this is achieved.  One of the reasons behind The Arora Report’s unrivaled performance in both bull and bear markets is the adaptiveness of the model.  Most models on Wall Street are static.  They work for a while and then stop working when market conditions change.

Initial claims came at 201K vs. 216K consensus. This indicates that the jobs picture is very strong, especially at the low end.

Japan

Japan’s Nikkei 225 crossed its high from 1989 for the first time in 34 years.  There is an important lesson for investors here.  Investors have come to believe that bear markets are short, but that is looking backwards through recent U.S. history.  Looking forward, given rising national debt and reckless government spending, there is a fair probability of a long bear market in the U.S. Therefore, it is imperative that investors increase their knowledge and access to a resource such as The Arora Report that has a long track record of making money in both bull and bear markets.  

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), NVDA, Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).

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 *** stocks in the early trade.  Smart money is *** stocks in the early trade.

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 *** 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 and seeing buying based on positive sentiment emanating from NVDA earnings.

There is speculation that bitcoin may see some selling as investors sell bitcoin to buy NVDA.   

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 up, and bonds are ticking 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.

Gold futures are at $2037, silver futures are at $23.02, and oil futures are at $77.74.

S&P 500 futures are trading at 5062 as of this writing.  S&P 500 futures resistance levels are 5210, 5400, and 5500 : support levels are 5020, 4918, and 4852.

DJIA futures are up 198 points.

EXTREME POSITIONING IN NVIDIA TAKES A HIT, FED MINUTES AHEAD

February 21, 2024

To gain an edge, this is what you need to know today.

Nvidia Positioning

Please click here for a chart of Nvidia stock (NVDA).

Note the following:

• The Morning Capsule is about the big picture, not an individual stock.  The chart of NVDA stock is being used to illustrate the point.
• Nvidia is at the center of the artificial intelligence revolution.  It is the best performing stock in the S&P 500 this year.
• The chart shows a pullback yesterday.
• The chart shows the volume yesterday was high when the stock dropped.  This is a negative.
• RSI on the chart shows that NVDA is no longer overbought after the pullback.  RSI shows that the stock can go either way after earnings.
• The chart shows extreme positive positioning in NVDA prior to the drop. The best way to understand extreme positive positioning is to think of a boat where everyone is on the same side.  It does not cause any problems as long as the waters are calm.  However, if a storm comes and everyone is on the same side, the boat sinks.  
• The chart shows that yesterday, extreme positive positioning took a hit, resulting in a large drop in the stock.  The positioning took a hit, not because a storm came, but because investors started jumping off the boat in anticipation of a storm from the earnings that are ahead.
• Understanding positioning can give you a big edge in the stock market.    Positioning is an important market mechanic that Wall Street professionals keep close to the chest because of its high value.  We disclose the secrets of positioning to you in the podcast titled “Market Mechanics: Positioning.”  The podcast is available in Arora Ambassador Club.  To get on the waitlist to join Arora Ambassador Club, please click here.
• The options market is predicting an 11% move in NVDA stock in either direction after earnings.  Pause for a second and think about it – this is the gain or loss of $200B in market value.
• We previously shared with you:

Less informed investors do not understand that stocks do not move based on published consensus earnings and revenue estimates.  Stocks move based on whisper numbers.  Whisper numbers are the numbers that analysts share privately, only with their best clients.  The whisper numbers for NVDA are at $5 for earnings and $22B for revenue.

• After hours yesterday, sentiment took a hit when momo crowd favorite cybersecurity stock PANW reported earnings.  The stock has fallen 24.6% as of this writing in the premarket.  PANW was priced for perfection, and so is NVDA.
• FOMC minutes will be released at 2pm ET.  Normally, FOMC minutes are market moving. However, today market movements are likely to be governed by position squaring by institutional investors ahead of NVDA earnings.
• In The Arora Report analysis, what happens to NVDA will impact the entire stock market. 
• 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.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN).

In the early trade, money flows are neutral in Apple (AAPL).

In the early trade, money flows are negative in NVDA, Microsoft (MSFT), Alphabet (GOOG), Meta (META), 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 *** stocks in the early trade.  Smart money is *** in the early trade.

Gold

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 8.52M vs. consensus of a build of 2.6M.

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 some selling in the early trade on nervousness about NVDA earnings.

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 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.

Gold futures are at $2040, silver futures are at $23.11, and oil futures are at $76.91.

S&P 500 futures are trading at 4975 as of this writing.  S&P 500 futures resistance levels are 5020, 5210, and 5400 : support levels are 4918, 4852, and 4826.

DJIA futures are down 81 points.

DATA FROM WALMART’S EARNINGS RUNS COUNTER TO STOCK MARKET BULLS’ HOPIUM

February 20, 2024

To gain an edge, this is what you need to know today.

Tepid Consumer

Please click here for a chart of Walmart stock (WMT).

Note the following:

• The Morning Capsule is about the big picture, not an individual stock.  The chart of WMT stock is being used to illustrate the point.
• The U.S. economy is 70% consumer based, and Walmart is the largest retailer in the U.S.  Therefore, investors should pay close attention to Walmart.
• The chart shows the stock is going higher as of this writing.
• The chart shows when Walmart reported earnings.  Walmart beat earnings estimates for the last quarter.  Here are the details:
  • Q4 revenue came at $173.4B vs. $158.4B consensus.
  • Walmart hit $100B in e-commerce sales.
  • Q1 adjusted EPS came at $1.48-$1.56 vs. $1.48 consensus.
  • Dividend increased by 9%.
• The stock market has held up, in part, due to excess consumer spending.
• Stock market bulls are counting on excess consumer spending continuing.
• Walmart earnings are painting a tepid picture of the consumer. Walmart says shoppers are staying “choiceful.”  The data from Walmart runs counter to stock market bulls’ hopium of the consumer continuing to spend excessively.
• Walmart stock is running up, in part, because Walmart is buying Vizio (VZIO) to expand advertising.  VZIO is in the ZYX Buy portfolio that surrounds the Model Portfolio.  The Arora Report call was for VZIO to be bought out.  That call has now proven spot on.  VZIO is the 191th Arora Portfolio company to be bought out.  Long time members of The Arora Report have made  fortunes from buyouts.
• Walmart stock is in the ZYX Buy Core Model Portfolio.  Members of The Arora Report have large unrealized gains on WMT stock.
• As we have stated before, the most critical item for the stock market is Nvidia (NVDA) earnings. For details, please see the Morning Capsule from February 14.
• 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.

Magnificent Seven Money Flows

In the early trade, money flows are neutral in Microsoft (MSFT).

In the early trade, money flows are negative in Apple (AAPL), Amazon (AMZN), Alphabet (GOOG), Meta (META), 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 *** stocks in the early trade.  Smart money is *** in the early trade.

Gold

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

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 volatile and trading above $52,000.

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 $2041, silver futures are at $23.20, and oil futures are at $78.05.

S&P 500 futures are trading at 5002 as of this writing.  S&P 500 futures resistance levels are 5020, 5210, and 5400 : support levels are 4918, 4852, and 4826.

DJIA futures are down 132 points.

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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.