By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Wage Cut And Apple Complacency
Please click here for a chart of Walmart stock (WMT).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of Walmart stock (WMT) is being used to illustrate the point.
- The trendline on the chart shows the steady move up in Walmart stock.
- The chart shows Walmart stock is breaking out on the news of wage cuts.
- RSI on the chart shows the stock has more room to run.
- As a full disclosure Walmart stock is in the Model Portfolio of ZYX Buy by The Arora Report.
- Walmart is the largest private employer in the country. For this reason, significant attention is paid to how Walmart pays its workers. The news is that Walmart is cutting starting pay for new hires with functions such as personal shopping, shelf stocking, and order picking.
- In The Arora Report analysis, wage cuts in the lower income segment will likely accelerate.
- In the higher income segment, employers are finding ways to layoff higher paid workers and replacing them with new hires at lower pay.
- Especially hard hit are many IT workers. Many IT workers have been told that there are no raises this year. Moreover, many IT workers who got bonuses last year are being told that there will be no bonuses this year. A large number of IT workers who were laid off last year and are insisting on matching their prior pay are still unemployed after months of searching for a job. There are reports of many workers accepting new jobs with as much as a 30% pay cut.
- Goldman Sachs (GS) is planning another round of job cuts to cull underperformers. As many as 5% of employees may be affected. Previously, Goldman Sachs cut 3,200 employees in the first quarter, the biggest job cut since the financial crash of 2008.
- The news of job cuts and wage reductions has to be music to the Fed’s ears. Afterall, this is exactly what the Fed has been intending.
- In The Arora Report analysis, the news of wage cuts and job reductions is a double edged sword. On the positive side, it reduces inflation. On the negative side, it will reduce consumer spending. This is especially important because the biggest reason the recession has been postponed is excessive consumer spending.
- There is complacency about Apple (AAPL) becoming a pawn in U.S. China geopolitics. In The Arora Report analysis, the complacency about Apple, along with over-ownership, represents a higher risk than is generally believed.
- Another challenge to Apple is a chip breakthrough in China leading to Huawei Mate 50 Pro. Previously due to the U.S. chip sanctions, Huawei was not able to produce a 5G phone. In a breakthrough, Semiconductor Manufacturing International, aka SMIC, a Chinese state-owned chip manufacturer was able to produce an advanced chip. Before the U.S. ban, Huawei had 12% of the smartphone market globally. Especially in China, the ban benefited Apple. The U.S. government is concerned and investigating how Huawei was able to produce such an advanced phone. This is an important subject for investors.
- Based on the U.S.’s request, the Indian military is reviewing how it will respond in the event of a Chinese invasion of Taiwan.
- In The Arora Report analysis, investors are underestimating the risk of a Chinese invasion of Taiwan.
- 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.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Apple, Nvidia (NVDA), Microsoft (MSFT), Meta (META), Tesla (TSLA), Amazon (AMZN), and Alphabet (GOOG).
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
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 ***. It is a Friday. On Fridays, moves tend to be exaggerated in whichever direction the market starts going. 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 $1944, silver futures are at $23.17, and oil futures are at $87.29.
S&P 500 futures are trading at 4454 as of this writing. S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4400, 4318, and 4200.
DJIA futures are down 9 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 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.
