By Nigam Arora
To gain an edge, this is what you need to know today.
Election Day Crosscurrents
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows QQQ dipped into zone 2 (support).
- The chart shows QQQ touched the 200 day moving average. Prudent investors need to know that a large number of investors have blind faith in the magical power of the 200 day moving average. Such investors sell on a breach of the 200 day moving average and buy on crossing above the 200 day moving average. Such investors have not thought through using first principles. They simply learned the anecdote and continue to adhere to it. The reality is the 200 day moving average has no inherent magical power. After all, why not 180 days or 220 days? The 200 day moving average derives its power from a large number of investors believing in it and acting on it. Such investors often get whipsawed.
- Yesterday saw a continuation of margin calls from Friday. These margin calls led to forced selling in tech stocks in momo crowd accounts.
- Historically, margin related forced selling runs its course and when it slows down, tech stocks lift. In the early trade, tech stocks are lifting in anticipation of forced selling ending. Prudent investors should carefully watch if tech stocks continue to lift throughout the day.
- Apple (AAPL) is important because AAPL stock had continued to rise during tech stock carnage. Many investors were simply rushing into AAPL, believing it to be a safe stock. This morning, AAPL stock is falling after earnings. Earnings were good, but Apple is seeing margin degradation due to high memory prices. Some investors who recently bought AAPL, believing it to be a safe stock, are now selling AAPL stock.
- In The Arora Report analysis, the most important issue facing Apple is AI agents. Apple derives significant revenue from its App Store, and the App Store is a strong moat. AI agents can bypass many apps. In the conference call, Apple was asked the AI agent question, but Apple failed to respond. This indicates that the AI agent issue for Apple is real and at this time, Apple does not have a solution. The issue is especially relevant for members of The Arora Report because AAPL is long from an average of $4.68. AAPL is trading at $323.80 as of this writing in the premarket, representing a gain of 6819%. Due to very large gains, AAPL is a very large position in the ZYX Buy Core Model Portfolio.
- On the positive side, in The Arora Report analysis, Apple has a huge opportunity ahead if Apple can get Siri right and find a good solution for AI agents.
- Palantir (PLTR) is an important AI software stock. PLTR stock had been running up during the AI stock carnage. PLTR reported earnings better than consensus but below whisper numbers. There are also concerns about deceleration of commercial growth. PLTR has always derived significant business from the U.S. government. Bullish investors are betting on commercial growth. PLTR is in the ZYX Buy Core Model Portfolio, long from an average of $20.15. It is trading at $166.58 as of this writing, representing a gain of 727%.
- Midterm elections are today. Historically, it is a clearing event, and stocks rally irrespective of who wins. This time, there are two complications:
- The AI trade is in part dependent upon spending on data centers. There is rising sentiment against data centers. Election results may have an impact on data centers.
- The belief a few days ago that the U.S. would attack Iran after the midterm elections has quickly turned into belief that the U.S. and Iran will strike a deal after the election.
- Oil is falling as the narrative of a U.S. Iran deal takes hold.
- In The Arora Report analysis, prudent investors need to be careful. There is no certainty which direction the Iran situation will go.
- There are important earnings from Advanced Micro Devices (AMD) after hours. AMD earnings will tell if the PC slowdown is an Intel (INTC) specific problem or if AMD is taking share from Intel. If the answer is that AMD is taking share from Intel and there is no general slowdown in PCs, it has the potential to reignite the AI trade.
- Markets always have crosscurrents, both positive and negative. On this election day, it is important that investors do not get carried away with a bullish or bearish narrative and take time to understand the crosscurrents. It is also important for investors to not mix their politics with investing.
- Even though jobless claims numbers have continued to show a strong employment picture, there is mounting concern about layoffs. Disney (DIS) is planning to achieve 20% cost savings with layoffs.
- As an actionable item, the sum total of the foregoing is in the Arora Protection Band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the Arora Protection Band. The Arora Protection Band is one of the large number of unique edges that are available to members of The Arora Report.
Magnificent Seven Money Flows
Most portfolios are now heavily concentrated in the Mag 7 stocks. For this reason, to get ahead and get an edge, investors need to dig below the surface of the Mag 7 stocks. It is equally important to rise above the noise of daily news on the Mag 7 stocks. The best way to get an edge, dig below the surface, and rise above the noise of the daily news is to pay attention to early money flows in the Mag 7 stocks on a daily basis. When there is significant news in the Mag 7 stocks that rises above the threshold of noise and impacts your entire portfolio, it is covered in the main section above.
In the early trade, money flows are positive in Amazon (AMZN), Alphabet (GOOG), Meta (META), Nvidia (NVDA), and Tesla (TSLA).
In the early trade, money flows are negative in Apple (AAPL) and Microsoft (MSFT).
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 buying stocks 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. Smart money is an important indicator but is only one of hundreds of indicators that go into determining the Arora Protection Band and signals. Please click here and here to understand how signals are generated.
Very Very Short-Term Indicator
The Arora Report’s proprietary 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.
Gold
The momo crowd is *** gold in the early trade. This is reflected in gold ETF (GLD), silver ETF (SLV), gold miner ETF (GDX), and silver miner ETF (SIL). Smart money is *** gold 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
Interest rates and bonds are range bound.
The dollar is range bound.
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.
S&P 500 futures are trading at 7586 as of this writing. S&P 500 futures resistance levels are 7626, 7733, and 7795 : support levels are 7541, 7318, and 7194.
DJIA futures are down 158 points.
Gold futures are at $3973, silver futures are at $50.51, and oil futures are at $94.67.
Arora Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror. The proprietary Arora Protection Band from The Arora Report is very popular. The Arora Protection Band puts all of the data, all of the indicators, all of the news, all of the crosscurrents, all of the models, and all of the analysis in an analytical framework that is easily actionable by investors.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding *** in cash, Treasury bills, short term fixed income, 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.
