AI Frenzy Result – Perma Bulls Revered And Perma Bears Reviled, Apple And Amazon Earnings Ahead

To gain an edge, this is what you need to know today.

Perma Bull Perma Bear Sentiment Indicator

Please click here for a chart of Invesco QQQ Trust Series 1 QQQ.

Note the following:

• The chart shows that the AI frenzy driven rally continues.
• The chart shows that on the pullback, the trendline held. Technically, this is bullish behavior.
• The chart shows that the stock market is back up against the low band of the resistance zone. The pattern formed is a bullish pattern. The prior outside day pattern is now negated.
• The chart shows that RSI has pulled back, relieving the overbought condition. Technically, this is bullish as this often allows the stock market to go higher.
• Wall Street is full of gurus who are perma bulls. They are always bullish no matter what. Outside of mainstream Wall Street, there are a few prominent perma bears who are always bearish. The crowd is now revering perma bulls and reviling perma bears. Last year, the crowd was revering perma bears and reviling perma bulls.
• Interestingly, a vast majority of perma bull gurus did not recognize early on that there would be an AI rally. Many stayed oblivious to AI until everybody and their cousin knew about it. The result of the AI frenzy driven rally is that perma bulls are benefiting.
• Prudent investors make a point to never follow the perma bulls or the perma bears.
• Smart money uses the crowd’s reaction to perma bulls and perma bears as a sentiment indicator. In general, you want to buy when perma bears are revered and you want to be cautious when perma bulls are revered.  
• The crowd’s reaction to perma bears and perma bulls is one of the data points in the proprietary Arora Sentiment Indicator. 
• The deluge of earnings continues this week. Most important are earnings from Apple Inc AAPL and Amazon.com, Inc. AMZN. Both Apple and Amazon earnings are set to be released on August 3 after market close.
• Among the magnificent seven, the money is flowing in AAPL, NVIDIA Corp NVDA, Alphabet Inc Class C GOOG, AMZN, and Tesla Inc TSLA. It is a rare Monday when money is not flowing in Microsoft Corp MSFT and Meta Platforms Inc META.
• The all important jobs report is ahead on Friday.
• As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.

Bank Of Japan Curveball

The Bank of Japan (BoJ) unexpectedly threw a curveball after Friday’s decision to widen the band for yield control. Previously, the high band was 0.5%. BoJ unexpectedly bought JGBs at a yield of 0.6%.

Europe

There is important economic data from Europe. Here are the details:

• Eurozone Q2 GDP came at 0.3% quarter-over-quarter vs. 0.2% consensus.
• CPI came at -0.1% month-over-month vs. 0.3% consensus.
• Core CPI came at -0.1% month-over-month vs. -0.5% consensus.

China

China’s manufacturing PMI came at 49.3 vs. 49.2 consensus.

Non-manufacturing PMI came at 51.5 vs. 52.9 consensus.

The Chinese government is looking to provide stimulus to increase consumption. As a result, stocks in Hong Kong and Shanghai rose in spite of the weak data.

Momo Crowd And Smart Money In Stocks

The momo crowd is buying stocks in the early trade. Smart money is inactive in the early trade.

Gold

Gold futures have crossed above the psychologically important level of $2,000.

The momo crowd is buying gold in the early trade. Smart money is inactive in the early trade.

For longer-term, please see gold and silver ratings.

Oil

The momo crowd is buying oil in the early trade. Smart money is inactive in the early trade.

For longer-term, please see oil ratings.

Bitcoin

It has been revealed that the SEC had instructed Coinbase Global Inc COIN to halt trading on all crypto coins except Bitcoin to United States Dollar BTC/USD.  If Coinbase had followed the SEC order, this would have been the death knell for most cryptos. This is what led to legal action.

Bitcoin is range bound.

Markets

Our very, very short-term early stock market indicator is neutral but expect the market to open higher. 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.

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. To see the locked content, please click here to start a free trial.

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.

The Arora Report is known for its accurate calls. The Arora Report correctly called the 2008 financial crash, the start of a mega bull market in 2009, the COVID crash, the post-COVID bull market, and the 2022 bear market.  Please click here to sign up for a free forever Generate Wealth Newsletter.