Bears Take A Stand

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

Note the following:

• The chart is a monthly chart to give you a long term perspective.
• The chart shows the key resistance line.
• The chart shows that the relentless rise in the stock market this year is being punctuated in August.
• For the bull case, the extent of the ‘sell the news’ reaction to Nvidia’s (NVDA) extraordinary earnings blowout is troubling. The sell the news reaction is common, but the extent of the selloff on great news is not common.
• Members of The Arora Report had some clues yesterday before the selloff when the momo crowd was aggressively buying stocks, especially tech stocks, before the market open.  Here were the important clues from the Morning Capsule:

Investors should be mindful of a potential ‘sell the news’ reaction as the day progresses in spite of the bullishness this morning.

Money flows in NVDA were extremely positive in after hours after release of the earnings.  However, in the premarket, money flows in NVDA are negative. Money flows after hours were very positive in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).  However, money flows this morning are negative in AAPL and GOOG.

Our very, very short-term early stock market indicator is positive but can quickly turn negative.

• The case that bears are making is that a double top is developing on the chart.  The double top is a negative pattern.
• Permabear gurus are out in full force declaring the AI frenzy driven stock market rally is over.
• The momo crowd is not deterred by permabear proclamations.  The momo crowd is buying again believing that the NVDA earnings dip is a buying opportunity.
• The chart shows that RSI has pulled back along with the market but is still overbought.
• Investors are waiting for Powell’s speech at Jackson Hole.  The speech will start at 10:05am ET.
• Going into the speech, investors are obsessed with R*.  R* is a theoretical level indicating a neutral rate.  In plain English, a neutral rate is an interest rate that is not restricting or stimulating the economy.
• Since 2009, the Fed’s projections have been a median of  2.5% for the long term policy rate.  The concern is that Powell may want a higher policy rate for the long term.  As a reference, in the past, Powell has said that he doesn’t know what the neutral rate should be.
• 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), Microsoft (MSFT), Meta (META), and Apple (AAPL).

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

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

Momo Crowd And Smart Money In Stocks

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

Gold

The momo crowd is 🔒 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 🔒.  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 $1944, silver futures are at $24.23, and oil futures are at $80.11.

S&P 500 futures are trading at 4401  as of this writing.  S&P 500 futures resistance levels are 4460, 4600, and 4713: support levels are 4318, 4200, and 4000.

DJIA futures are up 133 points.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding 🔒 in cash or Treasury bills or allocated to short-term tactical trades; and short to medium-term hedges of 🔒, and short term hedges of 🔒. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

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

Traditional 60/40 Portfolio

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

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of 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.

Nvidia To The Rescue

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 because Nvidia is driving the big picture right now.
• The chart shows a gap up on blowout earnings.
• We previously shared with you prior to Nvidia earnings:

The consensus is $11.2B in sales for the last quarter and $12.5B for the current quarter.  The consensus is $18B per quarter starting in 2025.  There will be many details in the earnings report.  However, it is the revenue number and revenue projections that will mostly determine where the stock goes and, by extension, where the entire stock market goes.

• Earnings from Nvidia were one of the best we have seen in our over 30 years in the markets.
  • Nvidia reported revenues of $13.5B for Q2.
  • For the current quarter, Nvidia is guiding revenues of $16B.
  • Nvidia reported Q2 data center revenues of $10.32B, up 141% from Q1.
  • Nvidia is authorizing an additional $25B in share buyback.
• Permabears are out in force saying that Nvidia is a very expensive stock.  They were saying the same thing when Nvidia reported earnings for Q1, and the stock gapped up as shown on the chart.
  • In The Arora Report analysis, Nvidia is growing into its valuation.  Given the current trends, our take now is very similar to our call that we published right after Q1 earnings.  The prior call from three months ago is reproduced below for your convenience.

Many investors on social media are sadly mistaken about what happened yesterday after hours.  They are pointing to  a very expensive evaluation of a trailing PE of 164, a forward PE of 63, and price/sales of 26.  Yesterday’s earnings changed it all.  If the present trend continues, in The Arora Report analysis, Nvidia will likely earn $10 – $12 in 2024.  Using $11 as the mid-point and even after a 29% stock jump after hours, this translates to forward PE of 36.  For a stock that performs significantly better than perfection, a forward PE of 36 is reasonable.  As a matter of fact, The Arora Report is raising its target on Nvidia to $565 – $615, compared to the closing price of $305.38.  Nvidia is in the ZXY Buy Model Portfolio.

• • The Arora Report raised the target zone on NVDA ahead of earnings.
• Two thirds of the rise in the stock market in 2023 is due to market mechanics.  When the stock market rises due to market mechanics, it is a highly risky market.  The stock market, especially AI stocks, have been showing signs of being on the verge of a significant correction.  However, the blowout earnings from Nvidia are saving the stock market from a drop.  
• Thank you for all of your requests for a new in-depth podcast on the risks and rewards of Nvidia after earnings. We have started work on the podcast.  The podcast will be available in Arora Ambassador Club.
• The Fed’s symposium in Jackson Hole kicks off today.  Powell’s speech tomorrow is critical.  
• Weekly initial jobless claims came at 230K vs. 240K consensus.  Initial jobless claims are a leading indicator and carries heavy weight in our adaptive ZYX Asset Allocation Model with inputs in ten categories.  In plain English, adaptiveness means that the model changes itself with market conditions.  Please click here to see how this is achieved.  One of the reasons behind The Arora Report’s unrivaled performance in both bull and bear markets is the adaptiveness of the model.  Most models on Wall Street are static.  They work for a while and then stop working when market conditions change.
• Durable goods data is mixed.
  • Durable goods came at -5.2% vs. -4.0% consensus.
  • Durable goods ex-transportation came at 0.5% vs. 0.2% consensus.
• Investors should be mindful of a potential sell the news reaction as the day progresses in spite of the bullishness this morning.
• 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.

BRICS

BRICS have invited these six countries to join: Iran, Egypt, Ethiopia, Argentina, Saudi Arabia, and U.A.E.

BRICS currently consists of Brazil, Russia, India, China, and South Africa.

BRICS are aiming to reduce  dominance of the U.S. dollar. 

Magnificent Seven Money Flows

Money flows in NVDA were extremely positive in after hours after release of the earnings.  However, in the premarket, money flows in NVDA are negative.

Money flows after hours were very positive in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).  However, money flows this morning are negative in AAPL and 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.

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 seeing buying on NVDA earnings.

Markets

Our very, very short-term early stock market indicator is 🔒.  This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.

Interest rates are ticking 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 $1942, silver futures are at $24.23, and oil futures are at $78.17.

S&P 500 futures are trading at 4466  as of this writing.  S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4400, 4318, and 4200.

DJIA futures are down 68 points.

King Nvidia

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

Note the following:

• The chart shows that QQQ touched the low band of the resistance zone and reversed.
• The chart shows that going into Nvidia (NVDA) earnings, QQQ has rallied to the downsloping trendline.
• RSI on the chart shows that the stock market is coming out of the oversold condition ahead of Nvidia earnings.
• The sum total of the foregoing is the technical setup for the stock market is positive going into Nvidia earnings.
• To fully understand the landscape going into Nvidia earnings, read the Morning and Afternoon Capsules from Monday and Tuesday.
• Today is one of those very rare days when earnings of a single stock become a macro event for the entire stock market.  Nvidia, king of AI, has now become the de facto king of the entire stock market. 
• Expect the momo crowd to aggressively buy call options on Nvidia, AMD (AMD), Microsoft (MSFT), and semiconductor ETF SMH today.
• Expect professionals to engage in position squaring.  In plain English, this means that they are going to assess their risk related to Nvidia and adjust the positions held.
• Short sellers who were going to cover their shorts ahead of Nvidia earnings have already covered their shorts.
• Wall Street positioning is very positive. Positioning is one of the important market mechanics.  Understanding market mechanics can give you a big edge. Due to the high value of market mechanics, a majority of the truly helpful information is kept secret by those who know.  There are several podcasts that give you a deeper understanding of market mechanics in Arora Ambassador Club.
• After yesterday’s 24.15% drop in the price of sporting goods retailer Dick’s Sporting Goods stock (DKS) on a bad earnings miss, there is a shocking cut in earnings projections from Foot Locker (FL).  Foot Locker is falling 31.72% as of this writing in the premarket.  In sympathy, shares of Nike (NKE), Under Armour (UA, UAA), and Lululemon (LULU) are coming under pressure.
• As shocking as earnings from DKS and FL are to the downside, earnings from teen apparel retailer Abercrombie & Fitch (ANF) are a blowout to the upside.  ANF is reporting EPS of $1.10 vs. $0.17 consensus.  ANF stock is up 17.20% as of this writing in the premarket.
• The stock of Peloton (PTON), the pandemic darling of the momo crowd, is falling 27.61% as of this writing to $5.06 on poor earnings and loss of subscribers.  Our long time members may recall that when PTON was trading about $170, almost all analysts were recommending strong buy.  The Arora Report was cautioning against buying PTON, and the call was to look for opportunities to short sell PTON.  Subsequently The Arora Report gave a short sell signal on PTON, and the trade was very profitable.
• Prudent investors also realize that right after Nvidia earnings there is a risk event ahead in Powell’s speech at Jackson Hole 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.   Please scroll down to see the protection band.

Magnificent Seven Money Flows

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

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.

Gold

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

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

Oil

API crude oil inventories came at a draw of 2.418M barrels vs. a consensus of a draw of 2.9M 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 $1932, silver futures are at $23.95, and oil futures are at $78.42.

S&P 500 futures are trading at 4406 as of this writing.  S&P 500 futures resistance levels are 4460, 4600, and 4713: support levels are 4400, 4318, and 4200.

DJIA futures are up 42 points.

Positive Sentiment

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

Note the following:

• There is positive sentiment in the stock market in the early trade for a number of reasons explained below.
• 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 chart shows Nvidia’s 8.47% gain on aggressive investor buying ahead of earnings that will be released tomorrow after the close. We shared with you various factors related to Nvidia in the prior Morning Capsule before most of the big rise yesterday.
• The chart shows that Nvidia is up another 2.41% as of this writing in the premarket.
• The chart shows the big rise in Nvidia when it reported earnings last quarter.  Investors are expecting a similar rise Wednesday after the close.
• The Arora Report very long term target on Nvidia was raised this morning.  Other than that, there is no change in our prior call on Nvidia.  We previously wrote:

In The Arora Report analysis, the demand for AI chips from Nvidia is far exceeding supply.  As good as this sounds, the whisper numbers have moved up.  Nvidia guided current quarter sales to $11B but whisper numbers are around $12B.  A lot will also depend on what Nvidia guides for the current quarter that ends in October.  Whisper numbers are around $12.5B.

• Historically, it is common for a high flying stock to fall after great earnings because even great earnings often do not match high whisper numbers.  To persuade their followers to buy Nvidia stock now before the earnings, momo gurus are preempting the possibility of Nvidia earnings coming below the high whisper numbers with a new mantra.  The new mantra is even if Nvidia earnings are less than whisper numbers, it does not matter because the artificial intelligence frenzy will ultimately run the stock higher.
• Wall Street is positioning for another leg up in the artificial intelligence frenzy rally.  Understanding positioning gives investors an edge.  For those who are interested in learning about positioning, listen to the podcast titled “Market Mechanics: Positioning.”
• Investors are also excited about stocks in Hong Kong rising about 2% within minutes.
• In The Arora Report analysis, the 2% rise in Hong Kong stocks was most likely caused by the Chinese Plunge Protection Team (PPT) buying stocks through state entities. PPT is believed to be a secretive team inside the Chinese government with the responsibility to buy stocks to stop them from plunging.  Chinese learned from the U.S.  The U.S. government is also believed to have a secretive PPT to buy stocks as needed.  
• Adding to the positive sentiment is the fact that the Chinese government sold dollars through banks.  The momo crowd likes anytime a foreign country or the U.S. government does something to weaken the dollar.  The reason is that S&P 500 derives a large portion of its earnings from overseas.  When the dollar weakens, it translates to higher earnings when converted into dollars.
• In The Arora Report analysis, a strong currency is the hallmark of a strong country.  In our analysis, it is very myopic of the momo crowd to celebrate a weaker dollar.  The long term interest of dollar based investors is in a stronger dollar, not a weaker dollar.
• On the earnings front, there are three important earnings:
  • Macy’s (M) beat the consensus but is cautious about the future. The stock is falling 7.6% as of this writing in the premarket.
  • Dick’s Sporting Goods (DKS) missed earnings.  The stock is plunging over 20% as of this writing in the premarket.
  • Lowe’s (LOW) beat the consensus.  The stock is up 2.53% as of this writing in the premarket.
• S&P has cut the credit ratings of several U.S. banks including Keycorp (KEY) and Comerica (CMA).
• Perma bears are out in full force warning investors about rising yields, geopolitics, lower earnings, high national debt, potential rise in inflation again, hawkish Fed, and the risk from Powell’s upcoming speech at Jackson Hole on Friday.  Perma bulls are responding by saying none of these negatives matter because artificial intelligence will boost productivity
• 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.

BRICS Attack The Dollar

BRICS is a bloc consisting of Brazil, Russia, India, China, and South Africa.  BRICS are meeting in South Africa.  President Ramaphosa of South Africa has invited leaders from 67 countries to attend the summit.  Interestingly, the U.S. and its European allies were not invited.

The summit has two focuses:

• Expanding BRICS with 40 additional countries who want to join BRICS.
• Attacking the U.S. dollar to reduce  the power of the U.S.

For all long term investors, it is important to allocate a part of the portfolio to emerging markets.  The best way is to utilize the buy zones and ratings on 14 emerging countries that have been covered in ZYX Emerging from The Arora Report for 16 years.  Investing in emerging markets is very different from investing in the U.S.  Positions should be built slowly over a number of years.

Magnificent Seven Money Flows

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

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.

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 🔒.  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 $1925, silver futures are at $23.40, and oil futures are at $79.98.

S&P 500 futures are trading at 4429 as of this writing.  S&P 500 futures resistance levels are 4460, 4600, and 4713: support levels are 4400, 4318, and 4200.

DJIA futures are up 24 points.

What Is Next

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.
• What happens next in the stock market will come down to Nvidia earnings and Powell’s speech at Jackson Hole.
• The chart shows when Nvidia earnings were last released.  Nvidia guided current revenues to $11B from $7B for the quarter.
• The gap up shown on the chart added about $184B in market cap.  This was the third largest market cap gain in one day in U.S. stock market history.
• Nvidia earnings accelerated the AI frenzy rally.
• The chart shows that there was a 262% gain in the Nvidia position if it was bought in the Arora buy zone shown on the chart.
• In addition, the trade around position in Nvidia has been nicely profitable.  Trade around positions are a technique used by hedge funds and billionaires that can dramatically increase your returns and reduce  your risks.  To learn about trade around positions, please see the Trade Management Guidelines.
• In The Arora Report analysis, the demand for AI chips from Nvidia is far exceeding supply.  As good as this sounds, the whisper numbers have moved up.  Nvidia guided current quarter sales to $11B but whisper numbers are around $12B.  A lot will also depend on what Nvidia guides for the current quarter that ends in October.  Whisper numbers are around $12.5B.
• A major factor will also be what Nvidia guides for 2025.
• In The Arora Report analysis, if no other competition emerges, Nvidia will be looking at $18B in quarterly revenues.  On the surface, Nvidia stock seems very expensive.  It is trading at a forward PE of 42.  However, in The Arora Report analysis, this PE can be justified based on the potential growth.
• Prudent investors should stick to the discipline of buying strategic positions in the buy zones and surrounding them with trade around positions as signals are given.  
• Nvidia earnings are scheduled to be released on Wednesday after the close.
• Powell will be speaking at Jackson Hole on Friday.
  • Bulls are hoping that he will say rate cuts are coming.
  • Momo gurus are already laying the groundwork to twist his words to run up the stock market irrespective of what he says.
• In The Arora Report analysis,  the highest probability is that Powell will say the Fed will be data dependent.  
• 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), Nvidia (NVDA), Microsoft (MSFT), Meta (META), Tesla (TSLA), and 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.

China

Interest rate cuts in China were less than expected.  This caused a sell off in Shanghai and Hong Kong. Stocks in Mainland China were down 1.2% and stocks in Hong Kong were down 1.8%.  The ETF of choice for Mainland China is ASHR.   The ETF of choice for Hong Kong is FXI.  ZYX Emerging from The Arora Report has covered China continuously for 16 years.

Momo Crowd And Smart Money In Stocks

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

Gold

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

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

Oil

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

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) is 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 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 $1925, silver futures are at $23.26, and oil futures are at $81.63.

S&P 500 futures are trading at 4392 as of this writing.  S&P 500 futures resistance levels are 4460, 4600, and 4713: support levels are 4318, 4200, and 4000.

DJIA futures are up 24 points.