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.’

POWELL JACKSON HOLE HOPIUM IS AT HAND, NVIDIA HOPIUM IS AHEAD, CARRY TRADE RISK

Aug 23, 2024

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

Hopium

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 after tracing a V bottom on the carry trade unwind, the stock market is in the resistance zone.
• The RSI pattern shown on the chart is such that the stock market can go either way.
• Bulls are hopeful that Powell’s speech at Jackson Hole today will trigger a breakout in the stock market to a new high.
• Powell will speak at 10am ET.  In The Arora Report analysis, Powell will likely be dovish.  We will be carefully listening to the speech for the following:
  • The size of the September rate cut
  • The pace of rate cuts beyond September
  • The neutral rate
  • The potential of a growth scare
• The consensus on Wall Street is that if the stock market does not break out above the resistance zone shown on the chart on Powell’s speech, the stock market will break out on Nvidia (NVDA) earnings.
• Nvidia earnings will be released on August 28 after the close.  Whisper numbers continue to ratchet up as analysts compete to generate business.
• The best way for prudent investors to think about the market now is that almost everyone is on one side of the boat.  The boat will continue to cruise just fine as long as there is no turbulence.  However, the slightest turbulence can cause trouble because almost everyone is on the same side.  
• The chart shows when the stock market recently fell on the unwind of the carry trade.  The unwind was due to the Bank of Japan (BOJ) raising its interest rates and consequently strengthening the yen.
  • A big part of the reason behind the market’s rally is a statement from the BOJ saying it would not raise rates as long as the market is unstable.
  • After the statement from the BOJ, funds are back establishing new carry trades.
• Prudent investors should note that Bank of Japan governor Kazuo Ueda has now stated, “If we are able to confirm a rising certainty that the economy and prices will stay in line with forecasts, there’s no change to our stance that we’ll continue to adjust the degree of easing.” In plain English, this means the BOJ is likely to raise interest rates again.  Such a raise may cause the carry trade to unwind again.  
• 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. The protection band is one of the large number of unique edges that are available to members of The Arora Report.

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 *** (To see the locked content, please take a 30 day free trial) stocks in the early trade.  Smart money is *** in the early trade.

Note for new members: Smart money often sells into the strength generated by momo crowd buying and buys into the weakness generated by momo crowd selling.  Over a long period of time, investors come out ahead by adopting smart money’s ways.  The exception is in a raging bull market – for very short term trades, consider following the momo crowd and not smart money.

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 range bound.

Markets

Our very, very short-term early stock market indicator is ***.  The reason is that the course of the market will depend on what Powell says.  There is no way to know with certainty what Powell is going to say.  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 $2535, silver futures are at $29.43, and oil futures are at $74.36.

S&P 500 futures are trading at 5624 as of this writing.  S&P 500 futures resistance levels are 5748 and 5926 : support levels are 5622, 5500, and 5400.

DJIA futures are up 165 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.

A protection band of 0% would be very bullish and would indicate full investment with 0% in cash.  A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.  Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

MOMO CROWD BUYING SEMICONDUCTORS AHEAD OF NVIDIA EARNINGS, BIGGEST PAYROLL REVISION SINCE 2009

Aug 22, 2024

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

Semiconductor Buying

Please click here for a chart of semiconductor ETF (SMH).

Note the following:

• The chart shows the moves in semiconductors after prior Nvidia (NVDA) earnings.
• The chart shows that semiconductors traced a double top, which is a negative pattern, and then dropped to the support zone.
• The chart shows that semiconductors bounced off of the support zone.
• RSI on the chart shows that semiconductors are overbought.  Overbought markets tend to be vulnerable to the downside.
• The momo crowd is aggressively buying semiconductors ahead of Nvidia earnings as they believe semiconductors will rise after Nvidia earnings just like they have in the past.
  • Prudent investors need to remember that history is instructive, but the road ahead is not always the same as the road behind.  
• U.S. payrolls have been revised down by 818,000 for the year ending in March.  This is the biggest downward revision since 2009.
• The Bureau of Labor Statistics did not post the jobs revision data on its website at 10am ET as it was supposed to.  However, the banks who called the Bureau were able to get the data, gaining an advantage.  The data was finally made available about 30 minutes late.
  • The initial reaction from the market was a spike up as many believe this will encourage the Fed to make bigger rate cuts.
  • Investors who knew that the data did not include data since March sold into the spike.
• The FOMC minutes were dovish and indicate that the Fed is poised to cut rates in September.
• Weekly jobless claims came at 232K vs. 225K consensus. Lately, the stock market is reacting when jobless claims are lower than the consensus but ignoring when they are higher than the consensus.  The reason is that the bullish sentiment is so extreme that investors want to hear only what makes the market go higher.  
• 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. The protection band is one of the large number of unique edges that are available to members of The Arora Report.

Magnificent Seven Money Flows

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

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

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

Note for new members: Smart money often sells into the strength generated by momo crowd buying and buys into the weakness generated by momo crowd selling.  Over a long period of time, investors come out ahead by adopting smart money’s ways.  The exception is in a raging bull market – for very short term trades, consider following the momo crowd and not smart money.

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 *** in 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 as the Harris campaign indicates support for crypto.

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 $2536, silver futures are at $29.62, and oil futures are at $72.29.

S&P 500 futures are trading at 5653  as of this writing.  S&P 500 futures resistance levels are 5748 and 5948: support levels are 5622, 5500, and 5400.

DJIA futures are up 55 points.

NVIDIA FEVER STOPS RISING, TARGET SHOWS CONSUMER RESILIENT, ANNUAL JOBS REVISION MAY MOVE MARKETS

Aug 21, 2024

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

Resilient Consumer

Please click here for a chart of Target stock (TGT).

Note the following:

• The Morning Capsule is about the big picture, not an individual stock.  The chart of TGT stock is being used to illustrate the point.
• The U.S. economy is 70% consumer based.  Therefore, prudent investors keep a close eye on consumer behavior.  Lately, there has been a lot of conflicting data about the consumer.
• This morning, there is new data about consumer behavior from earnings from Target, Macy’s (M), and TJX (TJX).  TGT earnings are the most important.
• The chart shows a big jump in TGT stock this morning after it reported earnings.
• RSI on the chart shows that the stock is now overbought.
• TGT may become a buy on a pullback.  If appropriate, a signal will be published in ZYX Buy.
• Here are the key points from Target earnings:
  • Target reported Q2 earnings of $2.57 vs. $2.18 consensus.
  • Q2 comp sales increased by 2% vs. a guide of 0% – 2%.
  • Target is raising FY25 EPS guidance.
  • Target cut prices on 5,000 items.  The consumer is recognizing the price cuts, and traffic has increased.
  • Apparel was a standout performer.  The consumer is facing pressure and looking for value.
  • Inventory turnover has increased.
• Previously, we shared with you that Walmart (WMT) recently also had strong sales and made comments similar to the ones from Target.
• Earnings from Macy’s are below expectations.  However, in The Arora Report analysis, Macy’s is an outlier.
• Earnings from TJX are above expectations.
• We previously shared with you that there has been aggressive buying in Nvidia (NVDA) as investors build positions ahead of Powell’s speech at Jackson Hole on Friday and Nvidia earnings on August 28.  Temporarily, NVDA fever has stopped rising.
• A big data release is ahead at 10am ET.  The release is the annual revision to jobs data.  This data may be market moving.  Investors should remember that the data for the year is through March and does not include the recent data.  The consensus is that the data will show that jobs growth was weaker than previously reported.  Estimates for weaker job growth are very wide, ranging from 300,000 to over 1M.  
  • In The Arora Report analysis, the report may impact what Powell says at Jackson Hole on Friday.  
• FOMC meeting minutes will be released at 2pm ET and may also move the 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. The protection band is one of the large number of unique edges that are available to members of The Arora Report.

Magnificent Seven Money Flows

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

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

In the early trade, money flows are negative in Alphabet (GOOG).

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

Note for new members: Smart money often sells into the strength generated by momo crowd buying and buys into the weakness generated by momo crowd selling.  Over a long period of time, investors come out ahead by adopting smart money’s ways.  The exception is in a raging bull market – for very short term trades, consider following the momo crowd and not smart money.

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

API crude inventories came at a build of 0.347M barrels vs. a consensus of a draw of 2.8M barrels.

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.

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 $2549, silver futures are at $29.61, and oil futures are at $73.58.

S&P 500 futures are trading at 5632 as of this writing.  S&P 500 futures resistance levels are 5748 and 5926: support levels are 5622, 5500, and 5400.

DJIA futures are up 56 points.

NVIDIA EARNINGS AND JACKSON HOLE HOPIUM DRIVING STOCK MARKET HIGHER BUT MARKET IS OVERBOUGHT

Aug 20, 2024

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

Overbought Stock Market

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 stock hit the bottom of the support zone during the carry trade crash.
• The chart shows relentless buying in NVDA since it hit the bottom of the support zone.
• The chart shows that NVDA is now approaching the resistance zone.
• The most important observation from the chart is RSI.  RSI shows that NVDA stock is now very overbought.
• Not only is NVDA stock overbought, the entire stock market is overbought.
• There are two factors driving the stock market higher.
  • Nvidia earnings hopium.  Nvidia will release earnings on August 28.
  • Jackson Hole hopium.  Powell will be speaking at Jackson Hole on Friday.
• Sometimes overbought markets become more overbought.  However, at this time prudent investors should pay attention to the Arora rule of being very careful in markets that are this overbought. When you follow this rule over a long period of time, you come out ahead.
• If the stock market rises again today, it will be on the longest winning streak since 2004.
• Sweden’s Riksbank cut its rate to 3.5% and projects three more rate cuts this year.  Sweden often leads other central banks.
• 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. The protection band is one of the large number of unique edges that are available to members of The Arora Report.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Alphabet (GOOG) and Tesla (TSLA).

In the early trade, money flows are neutral in Apple (AAPL), Amazon (AMZN), Meta (META), Microsoft (MSFT), and NVDA.

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.

Note for new members: Smart money often sells into the strength generated by momo crowd buying and buys into the weakness generated by momo crowd selling.  Over a long period of time, investors come out ahead by adopting smart money’s ways.  The exception is in a raging bull market – for very short term trades, consider following the momo crowd and not smart money.

Gold

Gold continues to levitate above $2500 on Jackson Hole hopium.

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) has moved up over $60,000 on Jackson Hole hopium.

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 $2565, silver futures are at $29.89, and oil futures are at $73.89.

S&P 500 futures are trading at 5631 as of this writing.  S&P 500 futures resistance levels are 5748 and 5926: support levels are 5622, 5500, and 5400.

DJIA futures are down 37 points.

STOCK MARKET REBOUNDS TO RESISTANCE ZONE, AMD’S AI STRATEGY TO COMPETE WITH NVIDIA

Aug 19, 2024

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

Stock Market At Resistance

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 touched the low band of the support zone during the carry trade related drop.
• The chart shows that the stock market has aggressively rebounded after touching the low band of the support zone.
• The chart shows that the stock market is now touching the low band of the resistance zone.
• The momo crowd appears to be oblivious to the resistance zone and aggressively buying.  However, smart money’s pattern is to trim when the stock market is in the resistance zone.
• RSI on the chart shows that the stock market is overbought.  In spite of aggressive momo crowd buying, overbought markets tend to be vulnerable to a pullback.
• The most important event this week is Fed Chair Powell’s speech at Jackson Hole on Friday.
• Chicago Fed President Austan Goolsbee is cautious against inflation arguments from both Trump and Harris.
  • Trump plans to increase tariffs. However, Goolsbee said that while tariffs increase inflation such increase is not prolonged.
  • Harris proposes to ban price gouging in food and grocery.  Goolsbee said that high prices are not due solely to price gouging.  In an interview, Goolsbee is careful not to take sides.
• Nvidia (NVDA) stock has been the leader driving the AI frenzy.  Advanced Micro Devices (AMD) has been trying to catch up but is far behind.  To strengthen its AI strategy, AMD is acquiring ZT Systems for $4.9B.  ZT Systems designs and optimizes cloud computing solutions.  ZT Systems will help AMD deploy AMD powered infrastructure at scale.
  • The media headlines about AMD competing with NVDA are highly misleading.  In The Arora Report analysis, AMD buying ZT Systems is only a very small step and will not meaningfully impact Nvidia’s market share.
  • Without a deep understanding, the momo crowd is aggressively buying AMD stock on the news.
• Layoffs in IT continue to expand.  General Motors (GM) is planning to cut 1,000 software jobs.  Last week, Cisco (CSCO), the networking giant, announced 4,000 job cuts.
• There has been a lot of concern about Mpox.  Mpox is now spreading beyond Africa.  The latest expert analysis is that Mpox will not have a severe impact in the U.S.  However, prudent investors should keep a close eye on the spread of Mpox.
• 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. The protection band is one of the large number of unique edges that are available to members of The Arora Report.

Magnificent Seven Money Flows

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

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

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

Note for new members: Smart money often sells into the strength generated by momo crowd buying and buys into the weakness generated by momo crowd selling.  Over a long period of time, investors come out ahead by adopting smart money’s ways.  The exception is in a raging bull market – for very short term trades, consider following the momo crowd and not smart money.

Gold

Gold is staying above $25,000.

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

Initially oil was sold as Iran did not attack Israel over the weekend.  However, as of this writing, aggressive buying is coming in oil.

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

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) is below $60,000.  There is a disappointment that bitcoin whales did not take advantage of low liquidity during the weekend to run up bitcoin.

Normally, buying in bitcoin and buying in speculative stocks go together.  However, recently a disconnect developed between the two.  The disconnect continues to persist in the early trade.

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 $2528, silver futures are at $29.08, and oil futures are at $75.63.

S&P 500 futures are trading at 5586 as of this writing.  S&P 500 futures resistance levels are 5622, 5748, and 5926: support levels are 5500, 5400, and 5256.

DJIA futures are up 41 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.