Walmart Attracts Wealthier Consumers – Stock Market Tell, Red Hot New Housing Slows

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

A Tell Ahead

Please click here for an enlarged chart of Walmart Inc WMT

Note the following:

• This article is about the big picture, not an individual stock. The chart of WMT stock is being used to illustrate the point.
• Walmart is the largest retailer in the U.S., for this reason Walmart earnings are very important to the stock market.
• The chart shows that WMT stock has broken out of the resistance zone on earnings.
• RSI on the chart shows that WMT stock is now over bought.
• In The Arora Report analysis, the follow up to the initial WMT breakout will be a tell for the entire stock market with the exception of tech stocks. If the breakout leads to a further rally, it will be a positive. If the breakout fails, it will be a negative.  
• WMT earnings are above the consensus and whisper numbers. Here are the details:
  • Q1 earnings came at $0.60 vs. $0.52 consensus.
  • Q1 revenues came at $161.51B vs. $159.5B consensus.
  • U.S. comp sales rose 3.8%.
  • WMT projects Q2 EPS of $0.62 - $0.65 vs. $0.64 consensus.
  • WMT projects FY25 EPS at the high or slightly above  $2.23 - $2.37 vs. $2.36 consensus.
• In The Arora Report analysis, Walmart is beating estimates because it is attracting wealthier consumers who previously did not shop at Walmart. This is the result of consumers seeking value as a result of high inflation. Walmart is benefiting from inflation.
• As full disclosure, WMT is in The Arora Report's ZYX Buy Model Portfolio. It is long from $19.25.  
• Initial jobless claims came at 222K vs. 218K consensus, but whisper numbers were running around 240K. In the early trade, stock market bulls are not liking this number. Upon release of this data, some selling came into the stock market. Stock market bulls’ reason that the Fed is more likely to cut rates earlier if jobless claims rise. As we have written before, this data is volatile. Investors should look at a four week moving average and not get carried away based on week to week fluctuations. Initial jobless claims is a leading indicator and carries heavy weight in our adaptive ZYX Asset Allocation Model with inputs in ten categories. In plain English, adaptiveness means that the model changes itself with market conditions. Please click here to see how this is achieved.  Most models on Wall Street are static. They work for a while and then stop working when market conditions change.
• The Fed’s Neel Kashkari said the Fed is likely to keep interest rates unchanged a bit longer.
• More Fed speak is ahead from the Fed’s Barkin, Harker, Mester and Bostic.

Housing

Housing starts came at 1.36M vs. 1.44M consensus. Building permits came at 1.44M vs. 1.48M consensus.

In The Arora Report analysis, the data indicates that the red hot market for new houses is beginning to cool.  

Magnificent Seven Money Flows

In the early trade, money flows are positive in NVIDIA Corp NVDA.

In the early trade, money flows are neutral in Apple Inc AAPL, Amazon.com, Inc. AMZN, Alphabet Inc Class C GOOG, Microsoft Corp MSFT, and Tesla Inc TSLA.

In the early trade, money flows are negative in Meta Platforms Inc META.

In the early trade, money flows are neutral 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.

Note for new investors: 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, very short term trades, consider following the momo crowd and not smart money.

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

Bitcoin BTC/USD is continuing its run along with speculative stocks after CPI data yesterday and is now trading above $66,000.

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.

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 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.