A Game Changer For Tesla In China Also Helping Apple, Japan Intervenes, Treasury Refunding

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

Game Changer

Please click here for an enlarged chart of Tesla Inc TSLA and Apple Inc AAPL.

Note the following:

• This article is about the big picture, not an individual stock. The charts of TSLA and AAPL are being used to illustrate the point.
• The chart shows that TSLA stock is jumping about $20 on the announcement from China.
• The chart shows that this big jump follows the stock jump after earnings in which Tesla reported terrible numbers.
• In the Morning Capsule from April 24, we shared with you three points that were causing not only TSLA stock to jump on bad earnings but were also lifting sentiment across the entire stock market.
  • Tesla accelerating development of a cheaper model
  • Tesla’s plan to own and deploy a fleet of 1M robotaxis
  • Tesla increasing its AI capacity
  • For details, please see the referenced Morning Capsule.
• Tesla stock is jumping today as Musk scored a coup in a surprise visit to China. China has, in principle, approved Tesla Full Self Driving (FSD).
  • To meet Chinese regulations, Tesla is partnering with Chinese company Baidu Inc BIDU for mapping and navigation.  As full disclosure, BIDU has been on the Arora AI stock list. The Tesla deal has triggered a buy signal. To learn about the trigger event screen of the ZYX Change Method, please click here.
• Tesla’s deal in China is also lifting AAPL stock. Tesla’s deal indicates a reduction in the China risk for Apple.  Also helping Apple is a broker upgrade.
• On the negative side, the European commission has designated iPadOS as a gatekeeper under DMA. This indicates that the regulatory pressure on Apple is ratcheting up, which is a negative.
• The chart shows when the Arora signal was given to hedge AAPL stock. The hedge is nicely profitable. As full disclosure, a signal has triggered to take partial profits on the hedge.  
• The move up in TSLA and AAPL is lifting the sentiment across the entire stock market.
• Apple will be reporting earnings on Thursday. Apple earnings have the potential to move the entire stock market. 
• Treasury refunding announcement is ahead. The last Treasury refunding announcement caused big stock and bond market rallies as the Treasury designed it specifically to rally the stock and bond markets. We will be carefully reviewing the Treasury announcement. 

Japan

Overnight, Japan intervened in the forex markets to prop up the yen. There was significant volatility causing about a six point range in yen trading. For a currency, this is a big range. This is the first Japanese intervention since 2022.

Japanese intervention is also creating positive sentiment.

Magnificent Seven Money Flows

In the early trade, money flows are positive in AAPL, Amazon.com, Inc. AMZN, and TSLA.

In the early trade, money flows are neutral in Microsoft Corp MSFT and NVIDIA Corp NVDA.

In the early trade, money flows are negative in Alphabet Inc Class C GOOG and Meta Platforms Inc META.

In the early trade, money flows are mixed in SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust Series 1 QQQ.

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

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.

The most popular ETF for gold is SPDR Gold Trust GLD. The most popular ETF for silver is iShares Silver Trust SLV. 

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.

The most popular ETF for oil is United States Oil ETF USO.

Bitcoin

There is disappointment that bitcoin BTC/USD was not run up by bitcoin whales taking advantage of the low liquidity over the weekend.

Those who fell prey to bitcoin halving pitches orchestrated by bitcoin whales and bought bitcoin over $70,000 are now sitting on losses. 

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 a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. 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 seven 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 big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.