WEEKLY STOCK MARKET DIGEST: PRUDENT INVESTORS LOOK AHEAD THROUGH THE AI FRENZY IN THE STOCK MARKET

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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.’

APPLE ON TRACK FOR THE WORST REVENUE DECLINE STREAK IN TWO DECADES AND INTEREST RATES RISE – MOMO CROWD DOES NOT CARE

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

Long Yields Rise

Please click here for a chart of 20+ Year Treasury Bond ETF (TLT).

Note the following:

  • The chart shows that long bonds are falling because yields on long bonds are rising.  Bonds trade inverse to the yield.
  • The trendline on the chart shows that TLT had been making lower highs prior to the sudden drop.
  • The chart shows that TLT has now fallen below the prior support zone, which has now become the resistance zone.
  • The chart shows the next support zone.
  • RSI on the chart shows that TLT is way oversold.  An oversold condition can lead to a quick bounce, but the bounce may not be sustainable in view of the huge supply of Treasury bonds. As a member of The Arora Report, you knew in advance that this was likely to happen due to increased borrowing by the U.S.  We previously wrote:

In The Arora Report analysis, here is an important piece of new data that prudent investors should pay attention to.  The U.S. Treasury Department has announced that it plans to borrow about $1T in the third quarter.  This is the largest amount ever to be borrowed by the U.S. in any third quarter.  More importantly, the amount to be borrowed is about $200B more than the prior estimates.

  • Along with the rise in yields on U.S. government bonds, yields on government bonds across the globe are rising.
  • Traditionally when yields rise, stocks fall.  The reason is that stocks compete with bonds.  When yields rise, bonds become more attractive.
  • Since technology stocks tend to be long duration stocks, historically, they are impacted negatively more than other stocks by rising yields.  To develop an in-depth understanding of how it all works, listen to the podcast titled “Be Careful With Popular Long Duration Stocks.”  In addition to this podcast, there are several other podcasts in Arora Ambassador Club that give you in-depth knowledge on the subject.
  • Rising yields were responsible for the significant drop in technology stocks and the bear market in 2022.
  • In 2023, investor exuberance over AI became so great that investors stopped caring about the yields.  As a result, the historical relationship between stocks and bonds broke.  Will the historical relationship reassert itself?
  • Here are the key points from Apple (AAPL) earnings:
    • Apple earnings were slightly below the consensus and significantly below the whisper numbers.
    • Apple revenues declined for the third quarter in a row.
    • Apple is on track for declining revenues in this quarter.  This will make the worst revenue decline streak for Apple in two decades. 
    • iPhone sales declined.
    • On the positive side, service revenues reached an all time high of $21B.
    • Apple now has one billion customers for its services.
    • Apple sales in India hit a record.
  • Amazon (AMZN) earnings were significantly better than consensus and slightly better than the whisper numbers.
  • Both Apple and Amazon hyped AI in their conference calls.  However, considering the huge investment AI needs, neither company seems to have a clear map to profit from AI.
  • In The Arora Report analysis, right now investors are not looking ahead, and the AI frenzy is so hyped up that investors don’t even ask how these companies will profit from AI.  In due course, this will change.  
  • Stock futures fell after the release of Apple earnings along with  stock.
  • Subsequently, the People’s Bank of China said that it would increase funding support for the private sector.  The statement from China, not only caused a rally in Chinese stocks, it caused a significant rally in U.S. stock futures.  Stock futures started pulling back in anticipation of the jobs report and continue to slightly pullback after the jobs report.  The jobs report is mixed.  Here are the details:
    • Non-farm private payrolls came at 172K vs. 175K consensus.
    • Headline non-farm payrolls came at 187K vs. 200K consensus.
    • Hourly earnings came at 0.4% vs. 0.3% consensus.
    • Average work week came at 34.3 vs. 34.4 consensus.
  • The foregoing illustrates the advantage of an adaptive model that changes itself with market conditions.  Most models on Wall Street are static.  They work for a while and then they stop working when market conditions change.  The highly successful ZYX Asset Allocation Model with inputs in ten categories and a long track record of hundreds of accurate calls in both bull and bear markets is an adaptive model.  Here are two examples to consider:
    • In the past, there was a time when Apple revenues declined for one quarter and the stock was cut in half.  Now, Apple is on track for declining revenues for four quarters in a row and Apple stock is up 52% this year.  
      • This is where buy zones from The Arora Report absolutely shine.
      • The chart shows the Arora buy zone which allowed members of The Arora Report to buy Apple near the lows and experience large gains.  
    • Last year, technology stocks were hit hard because interest rates were rising.  This year, nobody cares.
  • 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

Money flows in Tesla (TSLA), Nvidia (NVDA), Amazon, and Alphabet (GOOG) are positive in the earning trade.

Money flows in Apple, Microsoft (MSFT), and Meta (META) are negative in the early trade.

Money flows in Nasdaq 100 ETF QQQ and S&P 500 ETF SPY are mixed.

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

Bitcoin 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 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 $1976, silver futures are at $23.68, and oil futures are at $81.91.

S&P 500 futures are trading at 4536  as of this writing.  S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.

DJIA futures are up 68 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.

See also  SILVER, GOLD, AND COPPER BREAKOUT, WALL STREET’S LAST BEAR THROWS IN THE TOWEL

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.

 

INVESTORS PIN HOPES ON APPLE AND AMAZON STOKING AI FRENZY

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

Hopes On Earnings

Please click here for a chart of Apple stock (AAPL).

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of AAPL stock is being used to illustrate the point.
  • After the U.S. credit downgrade, investors are pinning hopes on Apple and Amazon (AMZN) earnings to drive the stock market higher by stoking AI frenzy.
  • AAPL is the largest and most popular stock.  Many investors believe that AAPL stock is as safe as a money market fund, and they use it similar to a money market fund.  AAPL carries very heavy weight in the indexes and as such, AAPL stock is a big driving force behind the stock market.
  • The chart shows when AAPL stock dipped in the Arora buy zone, giving an opportunity to those who were not already in AAPL stock to buy AAPL.
  • The chart also illustrates the power of Arora buy zones.  A buy zone is a technique used by billionaires and hedge funds.  Please see the Trade Management Guidelines to learn more.
  • The chart shows the upward sloping trendline that has held since AAPL stock dipped in the Arora buy zone.
  • The chart shows when Silicon Valley Bank failed.  To prevent more bank failures, the Fed injected a massive amount of liquidity in the system.  Some of the liquidity injected by the Fed went into AAPL stock, driving it higher.
  • The chart shows RSI divergence.  In plain English, this means that RSI went lower as the stock price went higher.  From a technical perspective, this is a warning signal ahead of earnings.
  • Prudent investors will be carefully watching if the trendline holds after the earnings.
  • Bullish investors are expecting AAPL stock to jump to about $210 after earnings.  These investors are betting that AAPL will mention AI in its earnings release and subsequently in its earnings call, driving the stock higher.
  • From a fundamental perspective, the rise shown in AAPL stock on the chart has occurred with deteriorating earnings.  If the consensus is correct, AAPL is on track for three quarters in a row of declining revenues.
  • The move up in AAPL stock is driven by PE expansion driven by positive investor sentiment towards AAPL.  A year ago, AAPL was trading at a PE of 22.  Now, it is trading at a PE of 33.  A year ago, AAPL was trading at price/sales of 5.87.  Now, AAPL is trading at price/sales of 8.15.
  • We understand investors love AAPL.  Especially for newer members, before sending us a negative email for pointing out that AAPL stock is very expensive, keep in mind that AAPL stock is long from $4.68 in the ZYX Buy Model Portfolio by The Arora Report.  Due to large gains, AAPL stock has a very heavy weight in the portfolios of most long term members of The Arora Report.
  • Qualcomm (QCOM), a major supplier of technology to all smart phones including Apple, stated on its conference call that it is seeing significant weakness in phone sales in China.  The comment is mostly directed at Android phones.  If Android phone sales are so weak, is the iPhone immune?
  • Earnings from AT&T (T), Verizon (VZ), and T-Mobile (TMUS) show that there is weakness in phone sales.  However, it is not known if that weakness is only in Android phones.
  • In addition to Apple, Amazon will be reporting earnings after the close.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.

Jobless Claims

Initial jobless claims came at 227K vs. 225K consensus. This is a leading indicator and carries heavy weight in the highly successful adaptive ZYX Asset Allocation Model with inputs in 10 categories.  In plain English, adaptive means that the model changes itself with market conditions.  Most models on Wall Street are static.  They work for a while and then they stop working when market conditions change.  The adaptiveness of the ZYX Asset Allocation Model is, in part, responsible for the success of The Arora Report.  Please click here to see how adaptiveness is achieved.

Labor Costs

Unit labor costs came at 1.6% vs. 2.7% consensus.

Q2 productivity came at 3.7% vs. 1.7% consensus.

India

The economy in India continues to stay strong.  July services PMI came at 62.3 vs. 58.0 consensus.

Magnificent Seven

In spite of bullishness about Apple and Amazon earnings, money flows are negative in the early trade in Apple, Amazon, Alphabet (GOOG, GOOGL), Meta (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA).

Since the AI frenzy driven rally has been led by the magnificent seven stocks, it is important for investors to pay attention to the magnificent seven stocks.  Today, it is especially important to see how the magnificent seven stocks behave in view of Apple and Amazon earnings.

Money flows in the early trade in NASDAQ 100 ETF (QQQ) and S&P 500 ETF SPY are negative.

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 🔒 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 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 up, and bonds are ticking down.

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 $1967, silver futures are at $23.64, and oil futures are at $80.42.

S&P 500 futures are trading at 4519  as of this writing.  S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.

DJIA futures are down 84 points.

 

U.S. CREDIT RATING DOWNGRADED – MOMO CROWD AGGRESSIVELY BUYS THE DIP

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

U.S. Credit Downgraded

Please click here for a chart 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 consolidating in no man’s land.
  • The chart shows that the stock market is very stretched way above the 200 day moving average.
  • The RSI pattern shown on the chart indicates that the stock market can go either way.
  • The Arora Report had previously shared with you in advance that Fitch was warning it might downgrade the U.S. credit rating.
  • Fitch has downgraded the U.S. credit rating from AAA to AA+.  Fitch gives the following three reasons:
    • Fiscal deterioration is anticipated to continue.
    • The general government debt burden is too high and continues to grow.
    • Compared to AAA peers, there is an erosion of governance in the U.S.
  • The chart shows that the downgrade of the U.S. credit has not had much impact on the stock market in the early trade.
  • In The Arora Report analysis, the Fitch downgrade is justified, and the three reasons Fitch gave are correct.
  • In history, there has only been one other downgrade of U.S. credit.  This was in 2011 by S&P.
  • The downgrade of U.S. credit resonated across the globe, but not in the U.S.
    • On the downgrade, stocks fell in Japan by 2.3%, in Hong Kong by 2.5%, South Korea by 1.9%, in Australia by 1.2%, and in India by 1.0%.
    • Stocks in Europe opened lower, but as investors saw aggressive buying coming in U.S. stock futures, investors started buying the dip in European stocks. Stocks in Germany are down 0.8%, in the U.K. by 1.0%, in France by 0.6%, in Italy by 0.8%, and in Spain by 1.2%.
    • The momo crowd in the U.S. aggressively bought the shallow dip in stocks on the downgrade.
    • The momo guru narrative is that neither the Fitch downgrade nor the rising U.S. national debt matters to investors because there is upward momentum in the stock market.  In our over 40 years in the markets,  we have repeatedly seen that upwards momentum can quickly disappear.  Until upward momentum disappears, our job as investors is to acknowledge the reality that the momo crowd controls the market and the momo crowd does not care about the debt.
  • In The Arora Report analysis, here is an important piece of new data that prudent investors should pay attention to.  The U.S. Treasury Department has announced that it plans to borrow about $1T in the third quarter.  This is the largest amount ever to be borrowed by the U.S. in any third quarter.  More importantly, the amount to be borrowed is about $200B more than the prior estimates.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.
See also  DISNEY, UBER, STARBUCKS, AND MCDONALD’S SEND A POWERFUL SIGNAL TO INVESTORS BUT MOMO CROWD OBLIVIOUS

ADP

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

ADP data shows that the jobs picture continues to be very strong.  ADP employment change came at 324K vs. 185K consensus.

ADP data runs counter to the momo gurus’ narrative that the Fed will start cutting rates as early as September.  Momo gurus have used this narrative, in part, to successfully run up the stock market.  

Blind Money

Blind money is the money that flows into Wall Street on the first two days of the month without any analysis and irrespective of stock market conditions.  Blind money is typically invested in the afternoons.  Wall Street professionals front run the blind money by buying in the morning and selling to blind money at inflated prices in the afternoon.  Blind money is helping cushion the drop in the stock market on the credit downgrade.

Magnificent Seven

Since the AI frenzy driven rally has been led by the magnificent seven stocks, it is important for investors to pay attention to the magnificent seven stocks.  Today, it is especially important to see how the magnificent seven stocks react to the U.S. downgrade.

In the early trade, money is flowing out of Apple (AAPL), Nvidia (NVDA), Alphabet (GOOG, GOOGL), Amazon (AMZN), and Tesla (TSLA).  Money flows are especially negative in TSLA in the early trade.

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

Apple and Amazon will report earnings tomorrow after the market close.

Money flows in NASDAQ 100 ETF (QQQ) started the day out by being very negative, but they have turned positive as of this writing.

AMD

AMD (AMD) is not one of the magnificent seven stocks, but it is an important stock because AMD has the next best GPUs after Nvidia.  GPUs are essential for the large language model generative AI.  ChatGPT was trained on 10,000 Nvidia GPUs.

We wrote yesterday after AMD earnings:

If it was not for AI, AMD stock would have experienced a significant drop because the numbers are below whisper numbers and the stock had run up going into earnings.  The seven different mentions of AI in the earnings is helping the stock move higher.

The AMD conference call was very positive and emphasized that AMD is achieving strong engagement with potential customers on its artificial intelligence products.  AMD admitted that engagement does not mean revenues.

In The Arora Report analysis, an important point that no one is talking about is that AI products from AMD will dilute its margins.  Here is the key question for investors: Will the market care about lower margins in view of the expensive valuation of the stock, or will investors look past negatives in excitement over AI?

Those who want in-depth knowledge on AMD, listen to the podcast titled “Gaining An Edge: Semiconductors Are The Lifeblood Of AI.”

Momo Crowd And Smart Money In Stocks

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

Gold

Gold is seeing buying on the U.S. credit rating downgrade.  In The Arora Report analysis,  buying in gold is nowhere near as strong as would have been expected on the U.S. downgrade.  The reason is the long term interest rates are rising, and gold moves inverse to interest rates in the short term.

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

Bitcoin (BTC.USD) is seeing buying on the U.S. credit downgrade.

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 $1981, silver futures are at $24.27, and oil futures are at $81.61.

S&P 500 futures are trading at 4569 as of this writing.  S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.

DJIA futures are down 191 points.

 

WEAK SEASONALITY CONFRONTS AI FRENZY AND NO LANDING, TUPPERWARE NEW FAVORITE MEME STOCK

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

Resurgent Meme Crowd 

Please click here for a chart of Tupperware stock (TUP).

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of TUP is being used to illustrate the point.
  • As discussed in yesterday’s Morning Capsule and many other prior capsules, prudent inventors track sentiment.  Sentiment plays a major part in the moves in the stock market.
    • As an example, the stock market rally in 2023 is mostly based on positive sentiment driven by the AI frenzy, resulting in PE expansion.
  • The meme crowd was surging during the pandemic.  Theater chain AMC and video game retailer GME were top meme crowd favorites.  The meme crowd ran up GME from about $1 to over $120 (outside regular trading hours), and now the stock has fallen back to $22.  The meme crowd also ran up AMC from the $2 range to $72, and now the stock has fallen back to under $5.
  • As meme mania waned, meme stocks pulled back, causing many in the meme crowd to completely blow their accounts, while others lost over 90%.
  • An indication of sentiment approaching the extreme once again is the resurgence of the meme crowd.
  • Tupperware has become the latest meme crowd favorite.
  • The chart shows the move in TUP stock from $0.61 to $5.29 in a matter of days.  It is not that Tupperware all of a sudden discovered a cure for cancer or gave us any other positive news.  It is simply moving up on buying by the meme crowd and the resulting short squeeze.
    • The initial trigger for the meme crowd buying TUP stock was a regulatory filing by Tupperware that it had identified multiple misstatements in its financial reports and material weaknesses in internal controls.  Tupperware also said that it would have inadequate liquidity to fund its operations and might not be able to make principal and interest payments due on a loan.
  • The first ten days of August are a seasonally weak period.  The weak seasonality will confront the AI frenzy, FOMO, and buying on consensus of no landing.  Keep in mind that the momo crowd and meme crowd are oblivious as their belief that stocks are going to surge is getting stronger.
  • Two pieces of economic data ahead may be market moving:
    • July ISM Manufacturing Index will be released at 10am ET. The consensus is 46.8.  A number less than 50 is considered economic contraction.  This number is especially important because the consensus in the stock market now is of no landing.
      • Investors have been focused on the data that supports no landing and have been ignoring the data that shows there is still a fair probability of a recession.  How long can this continue?
      • In The Arora Report analysis, based on history this can continue until after the economy is in a recession.  History tells us that investors become very optimistic before a recession.  
      • A good example is 2007.  In October 2007, The Arora Report called for an extremely high probability of a recession and a stock market crash.  The protection band was at 100% protection level.  The call was to buy inverse ETFs and aggressively short the market for those who could short.  The consensus was of no recession and new highs in the stock market.  After The Arora Report call in October 2007, the stock market continued to go higher until, in 2008, the great financial recession occurred and S&P 500 lost about half of its value. Investors who were invested in the wrong sectors such as housing, savings and loans, and speculative stocks, lost 80% – 90% of their portfolios.  With the proper use of inverse ETFs, The Arora Report generated a positive return of 40% during the stock market crash and a return over 80% for those who could short.  
    • JOLTS job openings report will also be reported at 10am ET.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.
See also  POWELL RALLY VANISHES, QUALCOMM HEIGHTENS APPLE CONCERN, MOTHER OF ALL REPORTS AHEAD

Blind Money

Blind money is the money that flows into Wall Street on the first two days of the month without any analysis and irrespective of stock market conditions.  Blind money is typically invested in the afternoons.  Wall Street professionals front run the blind money by buying in the morning and selling to blind money at inflated prices in the afternoon.  However, in the early trade today, the stock market is under pressure due to the start of the weak seasonality period.

Momo Crowd And Smart Money In Stocks

The momo crowd is buying stocks in the early trade.  Smart money is lightly selling 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

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 has fallen below $29,000.

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 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 $1984, silver futures are at $24.39, and oil futures are at $81.21.

S&P 500 futures are trading at 4595 as of this writing.  S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.

DJIA futures are down 68 points.

 

AI FRENZY RESULT – PERMA BULLS REVERED AND PERMA BEARS REVILED, APPLE AND AMAZON EARNINGS AHEAD

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

Perma Bull Perma Bear Sentiment Indicator

Please click here for a chart of Nasdaq 100 ETF (QQQ).

Note the following:

  • The chart shows that the AI frenzy driven rally continues.
  • The chart shows that on the pullback, the trendline held. Technically, this is bullish behavior.
  • The chart shows that the stock market is back up against the low band of the resistance zone.  The pattern formed is a bullish pattern.  The prior outside day pattern is now negated.
  • The chart shows that RSI has pulled back, relieving the overbought condition.  Technically, this is bullish as this often allows the stock market to go higher.
  • Wall Street is full of gurus who are perma bulls.  They are always bullish no matter what.  Outside of mainstream Wall Street, there are a few prominent perma bears who are always bearish.  The crowd is now revering perma bulls and reviling perma bears.  Last year, the crowd was revering perma bears and reviling perma bulls.
  • Interestingly, a vast majority of perma bull gurus did not recognize early on that there would be an AI rally.  Many stayed oblivious to AI until everybody and their cousin knew about it. The result of the AI frenzy driven rally is that perma bulls are benefiting.
  • Prudent investors make a point to never follow the perma bulls or the perma bears.
  • Smart money uses the crowd’s reaction to perma bulls and perma bears as a sentiment indicator.  In general, you want to buy when perma bears are revered and you want to be cautious when perma bulls are revered.  
  • The crowd’s reaction to perma bears and perma bulls is one of the data points in the proprietary Arora Sentiment Indicator. 
  • The deluge of earnings continues this week.  Most important are earnings from Apple (AAPL) and Amazon (AMZN).  Both Apple and Amazon  earnings are set to be released on August 3 after market close.
  • Among the magnificent seven, the money is flowing in AAPL, Nvidia (NVDA), Alphabet (GOOG, GOOGL), AMZN, and Tesla (TSLA).  It is a rare Monday when money is not flowing in Microsoft (MSFT) and Meta (META).
  • The all important jobs report is ahead on Friday.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.

Bank Of Japan Curveball

The Bank of Japan (BoJ) unexpectedly threw a curveball after Friday’s decision to widen the band for yield control.  Previously, the high band was 0.5%.  BoJ unexpectedly bought JGBs at a yield of 0.6%.

Europe

There is important economic data from Europe.  Here are the details:

  • Eurozone Q2 GDP came at 0.3% quarter-over-quarter vs. 0.2% consensus.
  • CPI came at -0.1% month-over-month vs. 0.3% consensus.
  • Core CPI came at -0.1% month-over-month vs. -0.5% consensus.

China

China’s manufacturing PMI came at 49.3 vs. 49.2 consensus.

Non-manufacturing PMI came at 51.5 vs. 52.9 consensus.

The Chinese government is looking to provide stimulus to increase consumption. As a result, stocks in Hong Kong and Shanghai rose in spite of the weak data.

Momo Crowd And Smart Money In Stocks

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

Gold

Gold futures have crossed above the psychologically important level of $2,000.

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

It has been revealed that the SEC had instructed Coinbase (COIN) to halt trading on all crypto coins except bitcoin (BTC).  If Coinbase had followed the SEC order, this would have been the death knell for most cryptos. This is what led to legal action.

Bitcoin 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 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 $2,005, silver futures are at $24.65, and oil futures are at $81.30.

S&P 500 futures are trading at 4615  as of this writing.  S&P 500 futures resistance levels are 4713, 4770, and 4826: support levels are 4600, 4460, and 4400.

DJIA futures are up 46 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.

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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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