By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Speculative Sentiment
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 stock is being used to illustrate the point.
- Speculative sentiment is one of the major drivers of the stock market.
- Right now, speculative sentiment is in the very high zone.
- The battle of humanoid robots and robotaxis vs. electric vehicles is ahead. The result of the battle will significantly add to or take away from the speculative sentiment.
- The chart shows TSLA stock ran up on gamma squeeze. Gamma squeeze is an important Wall Street mechanic. Investors can gain a big edge by learning about Wall Street mechanics. To learn more about gamma squeeze, listen to the podcast titled “MARKET MECHANICS: IMPACT OF DEALERS’ GAMMA POSITION CHANGE ON THE STOCK MARKET.”
- The chart shows the resistance zone and support zones for TSLA stock.
- RSI on the chart shows that TSLA stock is close to being oversold. This makes it easier for TSLA stock to move up.
- The battle after Tesla’s earnings release will be the major determinant of the stock. Tesla will release earnings after the close today.
- Elon Musk has succeeded in getting a portion of Tesla’s shareholder base to focus on humanoid robots, robotaxis, and AI. In spite of Musk’s success in refocusing the shareholder base, a large portion of Tesla shareholders continue to be focused on the electric vehicle side of the business.
- Electric vehicle business continues to be weak and is likely to further weaken.
- Musk says that Tesla has humanoid robots in production, and they will be put to work at Tesla next year.
- Tesla aims to sell humanoid robots to other companies starting in 2026.
- Tesla’s robotaxi event was postponed from August to October. Expect more pump and mind blowing projections about robotaxis. To develop a solid foundation for investing in robotaxis, listen to the podcast in Arora Ambassador Club titled “ROBOTAXIS MAY BE THE BIGGEST ARTIFICIAL INTELLIGENCE PLAY.” To get on the waitlist to join the club, please click here to fill out the form.
- After the earnings release, there will be a battle between those who are focused on electric vehicles and those who are focused on humanoid robots and robotaxis. The result of the battle will not only impact TSLA stock but also the overall sentiment of the entire stock market.
- Among important earnings, General Motors (GM), GE Aerospace (GE), Coca-Cola (KO), Lockheed Martin (LMT), SAP (SAP), and Spotify (SPOT) are reporting better than expected earnings.
- UPS and NXPI are reporting worse than expected earnings.
- About 25% of S&P 500 companies are reporting earnings this week.
- The stock market is excited that Kamala Harris has secured enough delegates to clinch the nomination. Expect the excitement to be short lived.
- 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.
India
India continues to be one of the best long term opportunities. India focused fund FFXDF is in the ZYX Buy Model Portfolio. Three India focused ETFs, EPI, SMIN, and GLIN, are in the ZYX Emerging Model Portfolio.
The central government budget is always a big event for Indian stocks. The just unveiled budget is great for the long term, but in the short term, investors are spooked due to an increase in capital gains tax. Short term capital gains will have a 20% tax rate, and long term capital gains will have a 12.5% tax rate.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Tesla (TSLA).
In the early trade, money flows are neutral in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Apple (AAPL).
In the early trade, money flows are negative in Nvidia (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 *** (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 whales are hard at work with a wild Trump rumor aiming to drive bitcoin (BTC.USD) to the moon. The rumor is that Trump could create a national bitcoin strategic reserve. Of note is that Trump has apparently invited investors to the much hyped Bitcoin 2024 conference including a private round table event. Trump is apparently charging $845,000 per person.
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 $2406, silver futures are at $29.17, and oil futures are at $77.57.
S&P 500 futures are trading at 5606 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 down 7 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.
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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.
