By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Resilient Consumer
Please click here for a chart of Target stock (TGT).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of TGT stock is being used to illustrate the point.
- The U.S. economy is 70% consumer based. Therefore, prudent investors keep a close eye on consumer behavior. Lately, there has been a lot of conflicting data about the consumer.
- This morning, there is new data about consumer behavior from earnings from Target, Macy’s (M), and TJX (TJX). TGT earnings are the most important.
- The chart shows a big jump in TGT stock this morning after it reported earnings.
- RSI on the chart shows that the stock is now overbought.
- TGT may become a buy on a pullback. If appropriate, a signal will be published in ZYX Buy.
- Here are the key points from Target earnings:
- Target reported Q2 earnings of $2.57 vs. $2.18 consensus.
- Q2 comp sales increased by 2% vs. a guide of 0% – 2%.
- Target is raising FY25 EPS guidance.
- Target cut prices on 5,000 items. The consumer is recognizing the price cuts, and traffic has increased.
- Apparel was a standout performer. The consumer is facing pressure and looking for value.
- Inventory turnover has increased.
- Previously, we shared with you that Walmart (WMT) recently also had strong sales and made comments similar to the ones from Target.
- Earnings from Macy’s are below expectations. However, in The Arora Report analysis, Macy’s is an outlier.
- Earnings from TJX are above expectations.
- We previously shared with you that there has been aggressive buying in Nvidia (NVDA) as investors build positions ahead of Powell’s speech at Jackson Hole on Friday and Nvidia earnings on August 28. Temporarily, NVDA fever has stopped rising.
- A big data release is ahead at 10am ET. The release is the annual revision to jobs data. This data may be market moving. Investors should remember that the data for the year is through March and does not include the recent data. The consensus is that the data will show that jobs growth was weaker than previously reported. Estimates for weaker job growth are very wide, ranging from 300,000 to over 1M.
- In The Arora Report analysis, the report may impact what Powell says at Jackson Hole on Friday.
- FOMC meeting minutes will be released at 2pm ET and may also move the market.
- 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.
Magnificent Seven Money Flows
In the early trade, money flows are positive in NVDA, Amazon (AMZN), Meta (META), Microsoft (MSFT), and Tesla (TSLA).
In the early trade, money flows are neutral in 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).
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 *** in 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 build of 0.347M barrels vs. a consensus of a draw of 2.8M 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 $2549, silver futures are at $29.61, and oil futures are at $73.58.
S&P 500 futures are trading at 5632 as of this writing. S&P 500 futures resistance levels are 5748 and 5926: support levels are 5622, 5500, and 5400.
DJIA futures are up 56 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.
