WEEKLY STOCK MARKET DIGEST: A NEW CHANGE IN MARKET MECHANICS IMPACTS THE STOCK MARKET ESPECIALLY IN AI STOCKS, WHAT TO DO NOW

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By Nigam Arora & Dr. Natasha Arora

Weekly Digest from The Arora Report is popular among serious investors and money managers because they have found studying insights from the prior week gives them an edge over the coming weeks. Here is the day by day rundown from the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers of The Arora Report

Please scroll down for the section ‘Protection Bands and What To Do Now.’

 

WALMART CUTTING STARTING PAY AND NO RAISES IN IT IS A DOUBLE EDGED SWORD, COMPLACENCY IN APPLE

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

Wage Cut And Apple Complacency

Please click here for a chart of Walmart stock (WMT).

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of Walmart stock (WMT) is being used to illustrate the point.
  • The trendline on the chart shows the steady move up in Walmart stock.
  • The chart shows Walmart stock is breaking out on the news of wage cuts.
  • RSI on the chart shows the stock has more room to run.
  • As a full disclosure Walmart stock is in the Model Portfolio of ZYX Buy by The Arora Report.
  • Walmart is the largest private employer in the country.  For this reason, significant attention is paid to how Walmart pays its workers.  The news is that Walmart is cutting starting pay for new hires with functions such as personal shopping, shelf stocking, and order picking.
  • In The Arora Report analysis, wage cuts in the lower income segment will likely accelerate.
  • In the higher income segment, employers are finding ways to layoff higher paid workers and replacing them with new hires at lower pay.
  • Especially hard hit are many IT workers.  Many IT workers have been told that there are no raises this year.  Moreover, many IT workers who got bonuses last year are being told that there will be no bonuses this year.  A large number of IT workers who were laid off last year and are insisting on matching their prior pay are still unemployed after months of searching for a job.  There are reports of many workers accepting new jobs with as much as a 30% pay cut.
  • Goldman Sachs (GS) is planning another round of job cuts to cull underperformers.  As many as 5% of employees may be affected.  Previously, Goldman Sachs cut 3,200 employees in the first quarter, the biggest job cut since the financial crash of 2008.
  • The news of job cuts and wage reductions has to be music to the Fed’s ears.  Afterall, this is exactly what the Fed has been intending.
  • In The Arora Report analysis, the news of wage cuts and job reductions is a double edged sword.  On the positive side, it reduces inflation.  On the negative side, it will reduce  consumer spending.  This is especially important because the biggest reason the recession has been postponed is excessive consumer spending.   
  • There is complacency about Apple (AAPL) becoming a pawn in U.S. China geopolitics.  In The Arora Report analysis, the complacency about Apple, along with over-ownership, represents a higher risk than is generally believed.  
  • Another challenge to Apple is a chip breakthrough in China leading to Huawei Mate 50 Pro.  Previously due to the U.S. chip sanctions, Huawei was not able to produce a 5G phone.  In a breakthrough, Semiconductor Manufacturing International, aka SMIC, a Chinese state-owned chip manufacturer was able to produce an advanced chip.  Before the U.S. ban, Huawei had 12% of the smartphone market globally.  Especially in China, the ban benefited Apple.  The U.S. government is concerned and investigating how Huawei was able to produce such an advanced phone.  This is an important subject for investors.
  • Based on the U.S.’s request, the Indian military is reviewing how it will respond in the event of a Chinese invasion of Taiwan.  
  • In The Arora Report analysis, investors are underestimating the risk of a Chinese invasion of Taiwan.  
  • 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 Apple,  Nvidia (NVDA), Microsoft (MSFT), Meta (META), Tesla (TSLA), Amazon (AMZN), and Alphabet (GOOG).

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 *** 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 ***.  It is a Friday.  On Fridays, moves tend to be exaggerated in whichever direction the market starts going.  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 $1944, silver futures are at $23.17, and oil futures are at $87.29.

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S&P 500 futures are trading at 4454  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 9 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.

 

INVESTORS WAKE UP TO CHINA RISK AS APPLE IPHONE BAN EXPANDED

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

iPhone Ban Expanded

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 because AAPL stock is having a disproportionate impact on the stock market.
  • The chart shows the initial drop in AAPL stock on China banning iPhone use by government workers. Please see yesterday’s Afternoon Capsule and individual signals on Apple in ZYX Buy.
  • The chart shows AAPL stock falling farther as China expands the iPhone ban to other agencies and state owned enterprises.
  • The chart shows that AAPL stock has fallen in the support zone as of this writing.
  • The chart shows that AAPL stock previously touched the low band of the support zone subsequent to breaking the trendline and then bounced.
  • The chart shows that unless there is a rally, AAPL stock will have made a lower high on the bounce.  From a technical perspective, this is a negative.
  • The chart shows the Arora Buy Zone last year.  AAPL dipped in the Arora Buy Zone last year, allowing members of The Arora Report to buy AAPL stock near the lows and then ride the big rally.
  • As a full disclosure, long time subscribers of The Arora Report own AAPL stock from an average of $4.68.  New signals have been given in ZYX Buy.
  • The iPhone 15 launch is ahead.  Historically, the stock goes up into a new iPhone launch and then pulls back after the launch.
  • There is excitement about Apple potentially launching Siri 2.0.  Siri 2.0 reportedly incorporates the latest advances in AI.  It is no secret that Siri has fallen behind similar offerings from Alphabet (GOOG, GOOGL), Amazon (AMZN), and Samsung (SSNLF).
  • The Arora Report has been sharing with you the China risk in AAPL stock for a while.  Now, investors are waking up to it.  
  • There is also China risk to companies such as Tesla (TSLA), Nike (NKE), and Starbucks (SBUX), but so far, investors are oblivious. 
  • Jobless claims came at 216K vs. 233K consensus.  This data indicates that overall the job picture is remaining very strong.  For blue collar workers, the job picture is improving, but it is deteriorating for certain white collar workers, especially in IT.
  • A great hope is that artificial intelligence will increase productivity.  For the time being, Q2 Productivity-Revised came at 3.5% vs. 3.7% consensus.  This indicates that productivity is not rising as fast as expected.
  • 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 negative in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).

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 *** 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

API crude inventories came at a draw of 5.521M barrels vs. a consensus of a draw of 1.429M 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.

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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 $1946, silver futures are at $23.28, and oil futures are at $87.04.

S&P 500 futures are trading at 4437  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 down 90 points.

 

AS CONCERNS ABOUT THE STOCK MARKET IN SEPTEMBER MOUNT, PRUDENT INVESTORS WATCHING SEMICONDUCTORS

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

The Leading Sector – AI Frenzy

Please click here for a chart of semiconductor ETF SMH.

Note the following:

  • As concerns about weak seasonality in the stock market mount, prudent investors are keeping an eye on semiconductors.
  • The chart shows that semiconductors have been the leading sector due to artificial intelligence excitement.
  • Semiconductor ETF SMH is up 53.9% so far this year.
  • As always, human nature is such that any argument can be justified.
    • Stock market bears are justifying their bearish view by pointing to a potential double top as shown on the chart.  A double top is a negative pattern.
    • Stock market bulls are pointing to the fact that semiconductors broke above the trendline shown on the chart as a positive.  Bulls are also pointing to the fact that semiconductors bounced from the upper band of the support zone shown on the chart as a positive.
  • RSI shown on the chart indicates that even though semiconductors went up yesterday on AMD (AMD) win, the internal momentum is waning.  From yesterday’s Afternoon Capsule, we wrote:

In the face of all of the negative news, investors got excited by AMD’s forward camera win and are aggressively buying semiconductor stocks.  The excitement is spilling into other tech stocks.

  • AMD won the business from Hitachi Astemo for adaptive computing to power the new stereo format, forward looking camera for adaptive cruise control for autonomous emergency braking.

  • Also helping AMD are comments by CEO Lisa Su regarding opportunity in AI around its MI250s and MI300s.

  • The chart shows a leg up in semiconductors on extraordinary Nvidia (NVDA) earnings in May. However, as shown on the chart, semiconductors fell on extraordinary Nvidia earnings in August.  The main reason behind the difference in the stock reaction is Wall Street mechanics.  Investors can gain an edge by deeply understanding Wall Street mechanics.  There are several podcasts on Wall Street mechanics in Arora Ambassador Club.
  • There is selling in the premarket due to a big move in the dollar and Boston Federal Reserve President Susan Collins saying that “future tightening could be warranted.”
  • The rise in oil prices is leading to fears of inflation reigniting.
  • 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.

Europe

Rising oil prices and weak economic data are raising concerns about stagflation.  Stocks in Europe have fallen for six sessions in a row.

China

Some property stocks in China are showing the biggest gains since 2009 on hopes of a stimulus by the government.

India

G-20 Heads of State are meeting in New Delhi on September 9 and 10.  Prime Minister Modi of India is proclaiming that India will be a developed country by 2047.  India is ascendant and represents one of the best opportunities for long term investors.  ZYX Emerging from The Arora Report has covered India for 16 years continuously.

Magnificent Seven Money Flows

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

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

In the early trade, money flows are negative in S&P 500 ETF SPY and mixed in 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 *** 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 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 $1949, silver futures are at $23.62, and oil futures are at $86.26.

S&P 500 futures are trading at 4493  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 76 points.

 

WEAK SEASONALITY AHEAD IN THE STOCK MARKET BUT BULLS HAVE A GOOD ARGUMENT

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

Weak Seasonality

Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).

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Note the following:

  • The chart shows that the stock market is below the mini resistance zone.  The mini resistance zone shown on the chart is a magnet for traders.
  • RSI on the chart shows that after the late August rally, momentum is waning.
  • September is seasonally weak.  However, bulls have a good argument – in years when S&P 500 is up more than 10% going into September, September tends to be positive.
  • October is often the most volatile month of the year.  Most crashes have occurred in October.
  • In The Arora Report analysis, seasonality is one of the many factors that investors need to consider.  The most important factor in September will be market mechanics.  As of this writing, market mechanics are positive for the month, but market mechanics can quickly change.  
  • Understanding market mechanics can give you an edge. There are several podcasts in Arora Ambassador Club on market mechanics.
  • In addition to seasonality, here are the other important factors:
    • The AI frenzy fever was on the verge of breaking in mid-August, but then it picked up steam again.  What happens to the AI frenzy in September will come down to the news.
    • The consumer has been excessively spending, but low to mid income consumers are likely to start running into cash flow issues in the September/October timeframe and may start spending less.
    • Economic data, especially inflation data, will be very important
    • The next Fed meeting is scheduled for September 19 and 20.  In The Arora Report analysis, what the Fed does will come down to the economic data that is released between now and the Fed meeting.   
  • ARM (ARM) IPO is ahead.  ARM IP is licensed by all major smartphone manufacturers, including Apple (AAPL).  ARM is trying to position itself as an AI company.  Nvidia (NVDA) is a licensee of ARM.  As a full disclosure, there is a buy signal on ARM in ZYX Buy.
  • 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.

China

Caixin Services PMI came at 51.8 vs. 53.6 consensus.

In The Arora Report analysis, based on the recent data, China will likely miss its 5% growth target unless the government starts a major stimulus program.  So far, President Xi seems to be reluctant to start a new major stimulus program due to debt issues that are plaguing local governments in China.  

Magnificent Seven Money Flows

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

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.

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 $1957, silver futures are at $24.10, and oil futures are at $86.97.

S&P 500 futures are trading at 4515  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 5 points.

 

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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.

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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