WEEKLY STOCK MARKET DIGEST: SHOCKINGLY HOT JOBS REPORT BUT MOMO CROWD BUYS ON FAITH IN LATEST FED SPEAK

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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.’

SHOCKINGLY HOT JOBS REPORT BUT MOMO CROWD BUYS ON FAITH IN LATEST FED SPEAK

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

Hot Jobs Report

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 is up against the low band of the resistance zone.
  • RSI on the chart shows that the stock market can go either way.
  • The jobs report is shockingly hot.  Here are the details:
    • Nonfarm private payrolls came at 283K vs. 177K consensus.
    • Headline nonfarm payrolls came at 339K vs. 190K consensus.
    • Unemployment rate came at 3.7% vs. 3.5% consensus.
    • Average hourly earnings came at 0.3% vs. 0.3% consensus.
    • Average work week came at 34.3 vs. 34.4 consensus.
  • Based on the history, such a hot jobs report would have caused stocks to fall.  However, the momo crowd is aggressively buying stocks.  There are two reasons:
    • They are ignoring everything in the jobs report with the exception of the unemployment rate.  Momo gurus are using the fact that the unemployment rate came at 3.7% vs. 3.5% consensus as a reason to buy stocks.
    • As we have shared with you in the capsules, the Fed speak this week shows that the Fed is split with some members wanting to pause rate hikes for at least one month.  Momo gurus are urging their followers to buy stocks because in their view, a shockingly hot jobs report does not matter as they trust the Fed will not raise rates because of the recent Fed speak.
  • Prior to the start of Fed rate hikes, the momo gurus said the reason to buy stocks was to not fight the Fed. It is interesting that when the Fed was raising rates, the same momo gurus were saying that the reason to buy stocks was to fight the Fed.   All of a sudden, today, the momo gurus have switched their reason to buy stocks to not fight the Fed.
  • In yesterday’s Afternoon Capsule, we wrote:

AVGO is the most important of the after hour earnings today.  AVGO is making custom AI chips.  However, this is a very small part of the business.  Most of the business is low end commodity chips and legacy software business that it acquired. No doubt, like other companies, AVGO will probably talk mostly about AI.  Yesterday, from earnings of C3.ai (AI) and Salesforce (CRM), investors ignored AI talk and focused on projections driving both stocks lower.  Let us see if investors focus on the entire business or just AI today.  

For reference, please click here for a chart of AVGO.  In the interest of full transparency, this is exactly the same chart that was published May 31 in the Morning Capsule.  

  • AVGO earnings came roughly in line with the whisper numbers.  AVGO extensively touted how it will benefit from AI.  However, the brief attempt to run up AVGO stock failed and now the stock is down 1.74% as of this writing as smart money sold into the strength.  This shows that smart money is not getting carried away by the AI hype, but instead realizing that AI business is only a small part of AVGO’s business. 
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.

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 🔒 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

Buying in technology stocks is spilling over to bitcoin.

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 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 $1989, silver futures are at $23.96, and oil futures are at $71.72.

S&P 500 futures are trading at 4255 as of this writing.  S&P 500 futures resistance levels are 4318, 4400, and 4460: support levels are 4200, 4000, and 3950.

DJIA futures are up 215 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.

See also  FOMC MEETING, SAMSUNG OVERTAKES APPLE, AI DEMAND INDICATION AHEAD FROM AMD, AMAZON AND SUPER MICRO

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 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.

 

EINSTEIN AI FAILS TO RUN UP THE STOCK MARKET, BUT BLIND MONEY FRONT RUNNING AIMS TO RESCUE

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

Einstein AI

Please click here for a chart of C3.ai stock (AI).

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of C3.ai stock is being used to illustrate the point.
  • From yesterday’s Afternoon Capsule, we shared:

CRM and AI earnings are most important for the AI frenzy.

  • Big institutional money is in Salesforce (CRM).  Retail investors are in C3.ai (AI).
  • The chart shows a 52.9% move up in AI stock in two days in anticipation of the stock running up further after the earnings.
  • C3.ai earnings were good, but the company did not increase the guidance as bulls were hoping.
  • The chart shows that C3.ai stock dropped 31.0%.
  • What could be a better name for an artificial intelligence engine than Einstein?  Einstein is the name of the artificial intelligence engine to accelerate decision making at every stage of the sales cycle in Saleforce’s software.
  • CRM stock had run up in anticipation of talk about Einstein running up the stock further after earnings.   Earnings were good, but guidance was soft.  CRM hyped its artificial intelligence, but that has not helped the stock.  The stock is down about 7% in the early trade.
  • The foregoing reinforces the message that we have been sharing with you.  A fortune is to be made in artificial intelligence over the next seven years, but it is not going to be a straight line.  At times, it is going to be treacherous.  Just remember, that at one time Amazon (AMZN) stock lost 95% of its value.  It is imperative for investors to build their knowledge of investing in artificial intelligence.  Our long experience of working with thousands of private investors, investment advisors, and money managers has shown that those who take the time to build their knowledge perform significantly better compared to those who do not build their knowledge.
  •  This week, in a small way, the character of the stock market has changed.
  • Last week a mere mention of artificial intelligence would run up stocks.  This week, in spite of significant hype by companies about artificial intelligence, investors are focused on future projections and not just the hype.  At least for the day, a modicum of sanity has returned to the stock market.
  • Based on a modicum of sanity returning to the stock market, in the early trade, the stock market would have fallen more if it were not for front running blind money.  Blind money is the money that pours into Wall Street on the first two days of the month without any analysis and irrespective of market conditions.  Most of blind money is invested in the afternoon.
  • Wall Street front runs the blind money by buying certain stocks in the morning and then selling them to blind money in the afternoon at a profit.  Of course, blind money is oblivious because they do not care what price they pay.

ADP

ADP is the largest private payroll processor in the country.  It uses its data to give a glimpse of the jobs picture ahead of the official job report that will be released on Friday at 8:30am ET.

ADP came at 278K vs. 160K consensus.  This indicates that employment is staying strong.

Jobless Claims

Jobless claims came at 232K vs. 233K consensus.

Productivity

Q1 Productivity-Rev came at -2.1% vs. -2.7% consensus.

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 is having a hard time rallying above $27,000.

See also  DISNEY, UBER, STARBUCKS, AND MCDONALD’S SEND A POWERFUL SIGNAL TO INVESTORS BUT MOMO CROWD OBLIVIOUS

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 $1988, silver futures are at $23.46, and oil futures are at $68.67.

S&P 500 futures are trading at 4190 as of this writing.  S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are down 100 points.

 

AI FRENZY PAUSES AHEAD OF APPLE AI REVEAL, CHINA PMI WEIGHS ON THE STOCK MARKET

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

AI Frenzy Pauses

Please click here for a chart of Broadcom stock (AVGO)

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of Broadcom stock is being used to illustrate the point.
  • AVGO is a semiconductor company with presence in custom ASIC chips and networking chips.
  • The chart shows the move up on Nvidia (NVDA) earnings.
  • The chart shows a second move up on Marvell (MRVL) earnings.
  • The chart shows when Wall Street’s buy pump started with positive comments and/or upgrades from JPMorgan (JPM), Evercore ISI, KeyBanc, and BMO Capital among others.
  • The chart shows that RSI reached almost 90, signaling a very overbought condition.
  • The chart shows that the stock rocketed to a high of $921.78 on Wall Street’s pump and then abruptly pulled back to $798.81.  That is a drop of $122.97.  This shows how treacherous investing in AI is.  Those who followed the pump by Wall Street analysts and went all in got burned.
  • A fortune is to be made in artificial intelligence over the next seven years, but it is imperative that you increase your strategic and tactical knowledge of investing in AI.  The easiest way to gain this knowledge is to listen to the podcasts in Arora Ambassador Club.
  • AI frenzy may pick up again as Apple (AAPL) will likely discuss its AI strategy at its annual WWDC next week.
  • AAPL will also unveil a mixed reality headset named Reality Pro.  The headset is likely to be priced around $3000.  Depending upon Apple’s presentation, a mixed reality frenzy may develop on top of the AI frenzy.
  • JOLTS job openings data will be released at 10am ET.  Depending upon the data, it may be market moving.  The consensus is 9.4M vs. 9.59M last month.
  • The Fed’s Beige Book will be released at 2pm ET.

China PMI

China PMI data is weighing on the stock market in the early trade.  Here are the details:

  • Manufacturing PMI came at 84.8 vs. 51.4 consensus.
  • Non-manufacturing PMI came at 54.5 vs. 54.9 consensus.

Europe

The new data shows that inflation is falling in Germany and France faster than expected.

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 🔒 gold in the early trade.  Smart money is 🔒 in the early trade.

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

Oil 

Oil has fallen below $70.00.

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 failed to sustain above $28,000 as bitcoin gurus’ narrative to buy bitcoin due to the debt ceiling deal was absurd at best.

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 $1980, silver futures are at $23.41, and oil futures are at $67.24.

S&P 500 futures are trading at 4193  as of this writing.  S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are down 124 points.

 

NEW AI SUPERCOMPUTER DRIVES THE STOCK MARKET HIGHER

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

New AI Supercomputer

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 Nvidia stock is being used to illustrate the point.
  • The introduction of a new AI supercomputer over the weekend is driving the stock market higher in the early trade.
  • As investors, you are already wondering which company introduced this new AI supercomputer.  You probably guessed it right – right now all roads lead to Nvidia.  The new supercomputer is called NVIDIA DGX.  It is powered by NVIDIA GH200 Grace Hopper Superchips and NVIDIA NVLink Switch System.  NVIDIA NVLink Switch System is a new interconnect that allows all GPUs to work together as one.
  • Microsoft (MSFT) and Meta (META) are likely to be the first to gain access to the new supercomputer.
  • The chart shows that Nvidia stock is making a new higher high after the massive gap on earnings.
  • The chart shows that RSI is now at 91.  This indicates a very overbought condition.  When a stock is this overbought, it is vulnerable to a pullback on the slightest bad news.
  • Right now, Nvidia stock is driving all AI stocks higher.  In turn, AI stocks are driving the entire stock market higher.
  • If Nvidia stock reverses, all AI stocks may reverse, and in turn, the stock market may reverse.
  • We are on the record stating that AI is real and a fortune is to be made in AI over the next seven years.  Having said that, there is more to the economy and the stock market other than AI.  Right now, AI is trumping everything else.  Prudent investors will be carefully watching to see how long this trend lasts.
  • The fly in the ointment is that Nvidia chips are being manufactured by TSM.  TSM does not have enough manufacturing capacity to satisfy the demand.  Right now, there is no other manufacturer capable of stepping in quickly.
  • As an indication of the demand, back orders of systems featuring graphic chips are at the highest level at Super Micro Computer (SMCI).
  • To help you get a deeper understanding of investing in AI, a new podcast on an important aspect of investing in AI will be live shortly in Arora Ambassador Club.
See also  PAY ATTENTION TO NEW CHANGE IN ARTIFICIAL INTELLIGENCE STOCKS – NVIDIA AND PALANTIR

Taiwan

As investors are excited about AI and buying TSM and NVDA stocks, investors need to remember that TSM is located in Taiwan.  Clearly, China wants to capture Taiwan and gain the prize – the prize is TSM.  Capturing TSM is the biggest step China can take to beat the U.S. and become a superpower.

Important news that the media is not highlighting is that there appears to be near panic in defense circles that China can easily cut off internet and phone service to Taiwan, isolating Taiwan from the rest of the world.  Internet service to Taiwan comes from undersea cables.  These cables can be easily cut.  Taiwan is embarking on an accelerated program to deploy 700 satellite receivers to provide an alternative to undersea cables.

Debt Ceiling

Biden and McCarthy have reached a debt ceiling deal.  The next step is passage by Congress.  You will hear a lot of noise from both the left and the right, but ultimately the center is expected to hold and pass the deal.

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 🔒 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

Until last week, bitcoin gurus were predicting that there would be a default on the national debt, and that was the reason to buy bitcoin.  Now that a debt deal has been reached and bitcoin gurus have been proven wrong, the same gurus are urging their followers to buy bitcoin because the debt deal is good for bitcoin.  Of course, the sheep are obliging by buying bitcoin.

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 $1975, silver futures are at $23.28, and oil futures are at $70.69.

S&P 500 futures are trading at 4237 as of this writing.  S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are down 4 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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