Human-Like Reasoning AI Agents And Robots Are A Big Market For Nvidia, But Nvidia Stock Has A Problem

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

Dot Plot And Balance Sheet

Please click here for an enlarged chart of NVIDIA Corp NVDA.

Note the following:

• This article is about the big picture, not an individual stock.  The chart of NVDA stock is being used to illustrate the point.
• The chart shows that after a much anticipated keynote speech by Nvidia's CEO Jensen Huang, NVDA stock pulled back to the top band of the mini support zone.
• The chart shows aggressive buying ahead of Huang's speech in anticipation of NVDA stock going higher.
• The chart shows the momo crowd's expectations were not met.  Those in the momo crowd who primarily buy call options are now sitting on large losses.
• Huang's speech was excellent.  Here are the key points from The Arora Report's analysis:
  • Nvidia is doing excellent as a company.  There is a disconnect between NVDA stock price and Nvidia as a company.
  • The biggest market of all will be the market for robots.  Nvidia is well positioned to provide AI intelligence and systems for robots.
  • Human-like AI agents are at the cusp of widespread adoption.  These agents are based on reasoning models.  Reasoning models need significantly more compute than regular models.  AI agents will drive demand for Nvidia's chips.
  • Nvidia is moving into autonomous driving.  Nvidia announced a deal with General Motors Co GM.
  • Nvidia is widening its lead over competitors.
  • Nvidia is strengthening its moat.
• Here is the question everyone is asking: In spite of so many positives, why did NVDA stock not rocket up? 
• We have previously shared with readers that the problem NVDA stock has is over-ownership.
• Nvidia illustrates the beauty of the highly refined, multilayer methodology followed by members of The Arora Report.
  • The original core position in NVDA stock is long from $12.55 and most of the position is still being held.  This illustrates the power of the ZYX Change Method to buy a stock when it is in stage one.
  • The fact that most of the position is still being held, resulting in major gains, shows the foresight that comes from decades of experience.
  • Along the way, there have been successful, shorter term, trade around positions.
  • The core position is appropriately hedged to preserve the gains.
• The Fed will announce its rate decision at 2pm ET, followed by Chair Powell's press conference at 2:30pm ET.  The Fed is expected to leave rates unchanged.  We will be carefully analyzing the following:
  • The dot plot
  • The Fed's balance sheet, especially regarding QT
  • How Powell straddles the uncertainty caused by tariffs
  • The Fed's take on rising consumer inflation expectations.  Rising consumer inflation expectations are the last thing the Fed wants to see.
• The momo crowd's historical pattern is to buy ahead of the Fed meeting on hopium.  This morning is no different.  The momo crowd is buying stocks in the early trade hoping the Fed will help the market run up.

Japan

Prudent investors keep a close eye on the Bank of Japan (BOJ) due to the impact of the carry trade on stock markets across the globe including the U.S. stock market, particularly tech stocks.

BOJ has been in the mode of raising interest rates.  However, after its latest meeting, the BOJ left rates unchanged.  This has stopped the rise of the yen.

The primary reason BOJ did not raise interest rates appears to be the potential fallout from U.S. tariffs.  

Turkey

Turkey has detained the mayor of Istanbul Ekrem Imamoglu.  He is the main rival to Turkish President Erdogan.  The opposition is calling this "a coup against our next president."  Before this development, Turkey had a lot going for it.

• Turkey will benefit from increased spending in Europe.
• Turkey will benefit from thawing relations between the U.S. and Russia.
• Turkey has lately engaged in investor friendly policies.  As a result, there is a lot of room for the Turkish market to run.

The detention of Erdogan's main rival has raised concerns about political upheaval.  The Turkish lira crashed as much as 12% on the news.

A big dip in Turkey will likely be a buying opportunity.  Turkey has been covered continuously in The Arora Reoprt’s ZYX Emerging for 18 years.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Apple Inc (AAPL), Amazon.com, Inc. (AMZN), Alphabet Inc Class C (GOOG), Meta Platforms Inc (META), Microsoft Corp (MSFT), and Tesla Inc (TSLA).

In the early trade, money flows are positive 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 is range bound.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.  The proprietary protection band from The Arora Report is very popular.  The protection band puts all of the data, all of the indicators, all of the news, all of the crosscurrents, all of the models, and all of the analysis in an analytical framework that is easily actionable by investors.

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.