Electric Vehicles Win The Battle With Humanoid Robots And Robotaxis, The Economy Contracts In Germany

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

Speculative Sentiment

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

Note the following:

• This article is about the big picture, not an individual stock. The chart of TSLA stock is being used to illustrate the point.
• As we shared with you yesterday, speculative sentiment has been playing a big part in the stock market’s rise.
• The movement in TSLA stock plays a big role in speculative sentiment.
• The chart shows TSLA stock fell after earnings.
• The chart shows that the prior support zone has now become a resistance zone.
• Historically, when a stock rises on gamma squeeze, the rise often turns out to be temporary. So far, it appears that will be the case with TSLA stock. This illustrates why it is important for investors to understand market mechanics such as gamma squeeze. Wall Street professionals keep market mechanics close to the chest because of their high value.
• Prior to TSLA earnings release, in yesterday’s Morning Capsule, we wrote:

Electric vehicle business continues to be weak and is likely to further weaken.

• The Arora Report call on electric vehicles has proven spot on. Tesla’s electric vehicle sales fell 7%.
• Of special note is that Tesla plans to spend $10B this year on development of humanoid robots and robotaxis.
• Elon Musk tried his best to help those fighting on the side of humanoid robots and robotaxis. He said, “If you believe Tesla will solve autonomy, you should buy Tesla stock, and all these other questions are in the noise.”
• A battle took place between investors who are focused on electric vehicles and investors who are focused on future prospects of humanoid robots and robotaxis. At least temporarily in the early trade, electric vehicles have won.
• Speculative sentiment is taking a hit in the early trade as Tesla stock falls. Since October 2022, the coincidences have been such that every time speculative sentiment starts falling, some kind of news appears that momo gurus use to persuade their followers to buy. This time such news may appear from other earnings that have yet to come. In The Arora Report analysis, if good news does not appear, the stock market is ripe for a pullback.  
• Of note are Alphabet Inc Class C GOOG and Alphabet Inc Class A GOOGL earnings.  Alphabet reported good earnings, but the stock is being weighed down by spending on AI.

Germany

Flash Manufacturing PMI came at 42.6 vs. 44.1 consensus. A number less than 50 is considered economic contraction. Deepening economic contraction in Germany is impacting the rest of the Eurozone.

Magnificent Seven Money Flows

In the early trade, money flows are negative in Apple Inc AAPL, Amazon.com, Inc. AMZN, GOOG, Meta Platforms Inc META, Microsoft Corp MSFT, NVIDIA Corp NVDA, and TSLA.

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

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust GLD. The most popular ETF for silver is iShares Silver Trust SLV.  The most popular ETF for oil is United States Oil ETF USO.

Bitcoin

Bitcoin BTC/USD whales continue to push the rumor that Trump could set up a national bitcoin reserve.  The rumor continues to bring buying to bitcoin.

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 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 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.