By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Apple Gut Punch
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 compares SPY with Dow Jones Industrial Average ETF (DIA), Nasdaq 100 ETF (QQQ), Amazon (AMZN) stock, and Apple (AAPL) stock. For most of the year, as tech stocks cratered, Apple held up propping up the market since Apple carries a heavy weight in the indexes.
- As of Friday, Apple stock was worth more than Amazon, Alphabet (GOOG, GOOGL), and Meta (META) combined.
- The chart shows the dramatic difference between the performance of Apple stock and Amazon stock over the last month.
- On Sunday night, Apple announced a gut punch. The fourth quarter is the most important quarter for Apple. iPhone 14 Pro and iPhone 14 Pro Max production has been significantly cut due to Covid restrictions in China.
- In The Arora Report analysis, Apple is not likely to meet its earnings estimate for the fourth quarter.
- We have been sharing with you for a while that Wall Street earnings estimates are too high. This Arora call is about to be proven spot-on. Now, anyone can compute gross margins on earnings announced this quarter to see that Wall Street’s earnings estimates are unrealistically high. Goldman Sachs (GS) has lowered its earnings estimates for next year to flat vs. the prior estimate of 3% growth. It is only a matter of time before other Wall Street firms will have no choice but to lower earnings estimates.
- Last night stock futures were seeing significant selling on the Apple news, lower earnings estimates, and Meta, the parent of Facebook, starting large-scale layoffs.
- This morning, stock futures have flipped positive on aggressive buying on hopes of a Republican win in the midterm election.
- Here is a question that prudent investors need to ask, “Sure hope is eternal, but how long can the momo crowd ignore the bad news and keep on buying?”
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 🔒 but expect the market to open 🔒. 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 $1679, silver futures are at $20.78, and oil futures are at $92.10.
S&P 500 futures resistance levels are 3860, 3950, and 4000: support levels are 3770, 3630, and 3600.
DJIA futures are up 127 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 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 band 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.
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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.
