By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Walmart Shocker
Please click here for a chart of Walmart (WMT).
Note the following:
- The chart shows a big drop in Walmart stock.
- Walmart is the most sophisticated retailer in the world. Walmart has one of the best analytical forecasting capabilities and the most extensive data on millions of consumers. Walmart has the best management there is, yet it is being forced to preannounce earnings. Here are the details:
- Consumers are spending more on consumables due to inflation. After spending on consumables, consumers do not have enough money left so they are cutting back on general merchandise.
- Not long ago WMT was surprised as to how rapidly the consumer was getting hurt and WMT was forced to lower guidance. Clearly, WMT did not lower guidance enough as they underestimated how badly the consumer was hurting.
- WMT lowered Q2 EPS guidance by 8 – 9% vs. consensus of an increase of 2%.
- For the full year, WMT reduced EPS guidance by 11 – 13% vs. consensus of a decline of 1%.
- Since WMT touches such a large swath of the US population, there are significant implications for the US economy from WMT’s preannouncement.
- It is important to pay attention to momo gurus because they move the markets.
- Give it to the momo gurus – they have already twisted the WMT news into a reason to buy stocks. Here are their talking points:
- Since the consumer is getting hit so badly, it will force the Fed to stop its fight against inflation, and in turn, this will run up the stock market.
- WMT customers are lower income and lower middle class. This segment of the population, according to some gurus, does not matter for their favorite sectors such as technology.
- The problem is not widespread but specific to WMT. They correctly mention that McDonald’s (MCD), and Coca-Cola (KO) reported good earnings. According to the gurus, if the consumer is spending at McDonald’s and buying coke the consumer is doing just fine.
- To persuade their followers to buy stocks momo gurus are also citing good earnings from UPS (UPS), 3M Company (MMM), and General Electric (GE).
- They are ignoring that General Motors (GM) is expecting consumers to slow down.
- Here is a question for prudent investors to ponder. The stock market is significantly more complex than the business of Walmart. Walmart with its top-notch management and top-notch forecasting capabilities along with real-time data on millions of consumers is not able to predict correctly rapid changes in consumer behavior. How come momo gurus are able to predict with certainty that Walmart news is an opportunity to buy stocks?
- Do not underestimate the power of momo gurus. They have a large following of investors that do not do analysis of their own. Momo gurus are capable of running the market up.
- The prevailing momo narrative is that the stock market will make significant gains after the Fed’s announcement tomorrow.
- The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.
- The VUD indicator shows net supply of Walmart stocks.
Good News From South Korea
We have previously pointed out that South Korea is a major export economy worth paying attention to. There is good news from South Korea. South Korea’s Q2 GDP was up 0.7% vs. 0.4% consensus.
South Korea’s finance minister is expecting inflation to peak in September or October.
Europe
We previously shared with you that Putin is tightening the screws on Germany by cutting gas supplies. We have previously shared with you that there was a plan in Europe to cut gas consumption by 15%. Now European countries have agreed to the 15% cut.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial) stock 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
Coinbase (COIN) is being investigated by the SEC. This is dampening sentiment in bitcoin.
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 $1717, silver futures are at $18.52, and oil futures are $98.17.
S&P 500 futures resistance levels are 4000, 4200, and 4318: support levels are 3860, 3770, and 3630.
DJIA futures are down 151 points.
Protection Bands and What To Do Now?
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold 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.
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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.
