By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
New Economic Data
Please click here for a chart of Tesla stock (TSLA).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of TSLA is being used to illustrate the point.
- TSLA is one of the magnificent seven stocks.
- The chart shows a gap down on earnings.
- TSLA reported adjusted EPS of $0.71 vs. $0.74 consensus. TSLA reported revenue of $25.17B vs. $25.62B.
- It is not the earnings that is hitting TSLA stock. It is the projection of slow growth in 2024.
- At the conference call, Musk talked about a new lower cost model, perhaps costing around $25K. TSLA bulls are hoping that 2025 talk would overcome slowness in 2024. However, as of this writing, TSLA bulls are disappointed as bears have taken control of the stock.
- The chart shows that TSLA stock is now flirting with the bottom band of the support/resistance zone.
- RSI on the chart shows that TSLA stock is oversold. Oversold stocks tend to bounce. In traditional technical analysis, TSLA stock needs to bounce from here, otherwise the calls to exclude it from the magnificent seven will pick up steam.
- New data on GDP shows that the economy is robust. Q4 GDP-Adv came at 3.3% vs. 2.0% consensus.
- In The Arora Report analysis, GDP is stronger than almost anyone expected. This data again goes against the stock market consensus of six rate cuts starting in March.
- Durable orders data also shows strength.
- Durable orders came at 0.0% vs. 0.1% consensus.
- Durable goods ex-transportation came at 0.6% vs. 0.2% consensus.
- Initial jobless claims came at 214K vs. 200K consensus. This series is very volatile. In The Arora Report analysis, we look at the three month moving average. The data shows that the employment picture is strong.
- The Fed’s favorite inflation gauge, PCE, will be released tomorrow at 8:30am ET. PCE may be market moving.
- 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.
European Central Bank
The European Central Bank (ECB) is keeping its key interest rate at 4%. Just like in the U.S., the stock market in Europe is hoping for quick rate cuts. ECB is pushing against market expectations.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Apple (AAPL).
In the early trade, money flows are negative in Tesla.
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.
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
Houthis are claiming a successful hit on a U.S. warship. This is driving oil prices higher.
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 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 $2020, silver futures are at $23.01, and oil futures are at $75.97.
S&P 500 futures are trading at 4917 as of this writing. S&P 500 futures resistance levels are, 5020, 5210, and 5400: support levels are 4852, 4826, and 4770.
DJIA futures are up 84 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 seven 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.
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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.
