WEEKLY STOCK MARKET DIGEST: AI EXUBERANCE OVERCOMES NEGATIVES FOR THE STOCK MARKET — WHAT TO DO NOW

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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.’

NVIDIA FALLS BELOW TRENDLINE, FED’S WALLER IN NO RUSH TO CUT RATES

March 28, 2024

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

Nvidia Falls

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 that NVDA has fallen below the trendline.
  • If NVDA decisively closes below the trendline, that would be a negative for NVDA and tech stocks.
  • NVDA is the most important stock for this stock market as Nvidia is the center of the AI revolution.  For more details of the chart, please read yesterday’s Morning Capsule.
  • The momo crowd is ignoring NVDA’s fall below the trendline.
  • The Fed’s Christopher Waller sees no rush to cut interest rates.  He sees recent inflation data as disappointing and wants to see better inflation numbers prior to making the first rate cut.  Waller said, “[the data] tells me that it is prudent to hold this rate at its current restrictive stance perhaps for longer than previously thought to help keep inflation on a sustainable trajectory toward 2%.”
  • University of Michigan Consumer Sentiment will be released at 10am ET.  This may be market moving.
  • New economic data will be released Friday at 8:30am ET.   The market reaction will come on Monday as the market will be closed tomorrow for Good Friday.
    • PCE, the Fed’s favorite inflation gauge.  Consensus is 0.4% for Headline PCE and 0.3% for Core PCE.
    • Personal income.  Consensus is 0.4%.
    • Personal spending.  Consensus is 0.4%.
  • Initial jobless claims came at 210K vs. 213K consensus.  This indicates that the jobs picture remains strong, especially at the low end.
  • Q4 GDP – Third Estimate came at 3.4% vs. 3.2% consensus.  This indicates that the economy continues to be strong.
  • Q4 GDP Deflator – Third Estimate came at 1.6% vs. 1.7% consensus.
  • Expect cross currents from quarter end window dressing and rebalancing to continue. Please see yesterday’s Morning Capsule for more details.
  • 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) and Alphabet (GOOG).

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

In the early trade, money flows are negative in NVDA, Apple (AAPL), 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

Gold is hitting a new high.  

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

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) is above $70,000.  Bulls are hoping that whales will take advantage of low liquidity during the holiday weekend to run up bitcoin.

Those who are serious about making money in bitcoin carefully should listen to the three part series “WHALES’ SECRETS YOU NEED TO KNOW: CAPTURING BITCOIN PROFITS.”  To gain access to the series, please fill out the form below.

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 and bonds are range bound.

The dollar is stronger.

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 $2236, silver futures are at $24.87, and oil futures are at $82.68.

S&P 500 futures are trading at 5309 as of this writing.  S&P 500 futures resistance levels are 5400 and 5500 : support levels are 5256, 5210, and 5020.

DJIA futures are up 41 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.

See also  NVIDIA DRIVING STOCK MARKET RALLY, AVERAGE STOCK IS A DIFFERENT STORY, AI COPPER TRADE HURTING

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.

 

PAY ATTENTION TO NVIDIA CHART FOR NEAR TERM MARKET DIRECTION, TECH INSIDERS SELL, BALTIMORE IMPACT

March 27, 2024

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

Tech Insiders Sell

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.
  • NVDA is the center of the AI revolution and as such is the most important stock in this market at this time.  As is often the case, the chart shows crosscurrents.
  • The chart shows an outside day.  An outside day is a negative pattern in traditional technical analysis.  For details, please see a prior Morning Capsule.
  • The chart shows that the pullback after the outside day was bought and the trendline held.
  • The chart shows yesterday Nvidia had a major reversal.  In a major reversal the stock opens near the high of the day but then drops, closing near the low of the day.  This is a negative pattern.
  • Of comfort to bulls is that the volume was not heavy on the reversal.  This indicates a lack of conviction.  However, most of the drop occurred during the last hour of trading.  This is a negative.
  • Smart money tends to be most active in the last hour of trading.  In contrast, the momo crowd is most active in the first hour of trading.
  • The chart shows that on the bullish side, both on the outside day and reversal day, the trendline held.  This is a positive.
  • RSI on the chart shows that NVDA stock can go either way.
  • $1000 is the magnet for NVDA day traders and option buyers.
  • Pay close attention to the NVDA chart as what happens to NVDA will likely determine the course of the stock market in the near term.
  • Tech insiders from Amazon’s Bezos to Meta’s Zuckerberg are aggressively selling their tech stock holdings.
  • There is always some insider selling, but the insider selling taking place now in tech stocks is out of the ordinary.  
  • Insiders are more knowledgeable about their companies than outsiders.  Insiders are taking advantage of the momo crowd’s exuberance to unload their shares to the momo crowd.
  • Insiders are included in the smart money data that we publish.  
  • The ratio the corporate tech insider selling to buying has reached the highest level in three years.  
  • In The Arora Report analysis, just like sentiment, insider selling is a yellow light but not a precise timing signal.
  • There is all kinds of analysis on the economic impact of the Baltimore bridge disaster.  Baltimore is one of the busiest ports. Some analysts are warning of a negative impact on the national economy.  In The Arora Report analysis, with the exception of coal exports and auto imports, there is going to be no national impact.  Other ports on the East Coast have spare capacity.
  • 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.

Quarter End Window Dressing And Rebalancing

Quarter end window dressing is taking place.  In quarter end window dressing, some money managers buy the best performing stocks and sell the worst performing stocks so that they can show their clients that at the quarter end, they were holding the best performing stocks.

In quarter end rebalancing, some money managers are selling stocks and buying bonds.  The reason is that stocks have done better than bonds and money managers attempt to maintain a fixed ratio between stocks and bonds.

Magnificent Seven Money Flows

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

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

Gold

The momo crowd is *** 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 9.337M barrels, significantly more than the consensus.

The momo crowd is *** 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

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 stronger.

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 $2207, silver futures are at $24.58, and oil futures are at $81.09.

S&P 500 futures are trading at 5294  as of this writing.  S&P 500 futures resistance levels are 5400, and 5500: support levels are  5256, 5210, and 5020.

See also  STOCK MARKET CELEBRATES COOLER CPI, OIL GLUT BY THE END OF THE DECADE

DJIA futures are up 164 points.

 

AN NON-AI STOCK REDDIT SHOWS EXPANDING AI EXUBERANCE, IMPORTANT TREASURY AUCTION AHEAD, FED MIA

March 26, 2024

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

AI Exuberance Expands

Please click here for a chart of Reddit stock (RDDT).

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of RDDT stock is being used to illustrate the point.
  • Reddit is a social media company best known for the meme crowd running up meme stocks such as GameStop (GME) and AMC Entertainment (AMC).  Reddit is also home to the YOLO (you only live once) crowd.
  • Reddit came public at a price of $34 per share, the high end of the range.  As a full disclosure, RDDT is in The Arora Report portfolio.  The position is nicely profitable and partial profits have been taken.
  • The chart shows that options started trading on RDDT stock yesterday.
  • The chart shows that RDDT stock took off, rising 30% to $59.80.
  • The chart shows that RDDT stock kept running yesterday after hours and has continued to run in the premarket today, up another 13.7%.
  • Reddit is a 19 year old company that is unprofitable and cash flow negative.  
  • The narrative that is taking hold is that AI stocks such as Nvidia (NVDA) have already run up.  Now, investors need to find AI adjacent stocks.  The meme and momo crowds have chosen RDDT.
  • The story is that RDDT data is valuable as it can be used to train large language models.  Bulls cite a $60M deal with Google.  The deal with Google is already under regulatory scrutiny.
  • Take a moment to think about this; if you were a stock market investor and you went to an AI chatbot for answers, would you want answers based on the thinking of the meme crowd and the YOLO crowd?  Most of you would say “no.”  The absurdity of what is happening, as illustrated by the move in RDDT stock and many others, is primarily the result of two factors:
    •  Extremely positive sentiment
    • Very easy financial conditions
  • Historically, when financial conditions are this easy, the Fed steps in to put on the brakes.  However, the Fed appears to be a lost cause, at least for now.  It appears that instead of staying true to its mandate of price stability and maximum employment, in reality, the Fed is embarking on over goosing the economy and promoting speculation.  The Arora Report is apolitical.  Our sole job is to help investors.  Some conservatives are claiming that the purpose of the Fed over goosing the economy is to re-elect Biden.  Trump has already said that he will not reappoint Powell.
  • In The Arora Report analysis, there is a high probability that the data will show the Fed the error of over goosing the economy, and the Fed will go back to its function of applying the brakes to maintain price stability.
  • Durable good orders are strong.  Here are the details:
    • Durable goods came at 1.4% vs. 1.3% consensus.
    • Durable good ex-transportation came at 0.5% vs. 0.4% consensus.
  • Consumer confidence will be released at 10am ET.  This may be market moving.
  • $67B 5-year Treasury auction is ahead.  The auction is expected to be good.  However, in The Arora Report analysis, prudent investors need to be concerned about larger and larger sizes of Treasury auctions as the U.S. budget deficit balloons. If a Treasury auction is bad, or even worse fails, it can lead to a 30% – 50% retrenchment in the stock market.  This is a reason to pay attention to the protection band. 
  • 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 NVDA, Amazon (AMZN), 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 *** in the early trade.  Smart money is *** in the early trade.

Gold

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

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) is over $70,000 as the pump continues about bitcoin halving.

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 and bonds are range bound.

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 $2187, silver futures are at $24.89, and oil futures are at $82.03.

S&P 500 futures are trading at 5289  as of this writing.  S&P 500 futures resistance levels are 5400, and 5500: support levels are 5256, 5210, and 5020.

DJIA futures are up 46 points.

 

APPLE, ALPHABET, AND META UNDER E.U. PROBE; INTEL AND AMD BANNED; FED’S BOSTIC SAYS ONE RATE CUT

March 25, 2024

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

Threat To Tech

Please click here for a chart of Intel stock (INTC).

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of INTC stock is being used to illustrate the point.
  • The chart shows Intel stock ran up on AI excitement.
  • The chart shows a double top. We previously shared with you that this is a negative technical pattern.
  • The chart shows a gap down on earnings.  Since earnings, Intel has received about $20B in U.S. government grants and low cost loans.  Intel is the largest gainer from the Chips and Science Act, a law that Biden touts as his major achievement.
  • The chart shows that the big government grants failed to lift INTC stock much higher.
  • The chart shows the support zone.
  • The chart shows that in the premarket, INTC stock is falling below the support zone shown on the chart on China news. If the break is sustained, the support zone on the chart will become a resistance zone.
  • The Arora Report has been sharing with you the China risk for many popular stocks.   China is banning microprocessors from Intel and AMD (AMD) in government computers.  The Chinese government is also excluding Windows operating systems from government computers.
    • 27% of Intel’s $54B in sales is from China.
    • 15% of AMD’s $23B in sales is from China.
    • Only about 1.5% of Microsoft’s (MSFT) sales are from China.
  • The foregoing illustrates the risk to Apple (AAPL) from China.  About 20% of Apple’s sales are from China.  We are receiving requests for a podcast on Apple due to the China risk and the antitrust lawsuit.  If you are interested in an in-depth podcast on risks to Apple, please write to ambassador@thearorareport.com.
  • In a major development, Apple (AAPL), Meta (META), and Alphabet (GOOG, GOOGL) are under full E.U. probe under the new Digital Markets Act.
    • Unlike many probes, this probe has a huge risk as the fines can be up to 10% of global revenues.
    • These stocks are still holding up as the momo crowd is a big buyer at these prices, and the momo crowd does not do much analysis.
  • In a surprise move, an influential member of the Fed, Atlanta Federal Reserve Bank President Raphel Bostic said that now he expects only one quarter point rate cut this year.  Previously, Bostic had projected two rate cuts.
    • The stock market is positioned for three rate cuts.
    • We have previously shared with you The Arora Report analysis that bringing inflation down to 3% was easy, but bringing inflation down from 3% to 2% may prove to be difficult.  Now, Bostic is saying that he is less confident that inflation will continue to fall towards 2%.  
  • 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.
See also  NVIDIA SURPASSES APPLE ON AI FRENZY, ECB CUTS RATES

Magnificent Seven Money Flows

In the early trade, money flows are neutral in Nvidia (NVDA).

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

In the early trade, money flows are neutral in S&P 500 ETF (SPY) and positive Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

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

Gold

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

For longer-term, please see gold and silver ratings.

Oil

The momo crowd is *** 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 on weekend pump about bitcoin halving.  For next level information, listen to the podcast titled “Bitcoin Halving – Six Secrets Whales Do Not Want You To Know.”

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 and bonds are range bound.

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 $2176, silver futures are at $24.91, and oil futures are at $81.03.

S&P 500 futures are trading at 5277 as of this writing.  S&P 500 futures resistance levels are 5400, and 5500: support levels are 5256, 5210, and 5020.

DJIA futures are down 58 points.

 

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Picture of Nigam Arora

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.

Picture of Dr. Natasha Arora

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.

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