Weak Seasonality Confronts AI Frenzy And No Landing, Tupperware New Favorite Meme Stock

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

Resurgent Meme Crowd 

Please click here for a chart of Tupperware Brands Corp TUP.

Note the following:

• The Morning Capsule is about the big picture, not an individual stock. The chart of TUP is being used to illustrate the point.
• As discussed in yesterday’s Morning Capsule and many other prior capsules, prudent inventors track sentiment. Sentiment plays a major part in the moves in the stock market.
  • As an example, the stock market rally in 2023 is mostly based on positive sentiment driven by the AI frenzy, resulting in PE expansion.
• The meme crowd was surging during the pandemic. Theater chain AMC Entertainment Holdings Inc AMC and video game retailer GameStop Corp GME were top meme crowd favorites. The meme crowd ran up GME from about $1 to over $120 (outside regular trading hours), and now the stock has fallen back to $22. The meme crowd also ran up AMC from the $2 range to $72, and now the stock has fallen back to under $5.
• As meme mania waned, meme stocks pulled back, causing many in the meme crowd to completely blow their accounts, while others lost over 90%.
• An indication of sentiment approaching the extreme once again is the resurgence of the meme crowd.
• Tupperware has become the latest meme crowd favorite.
• The chart shows the move in TUP stock from $0.61 to $5.29 in a matter of days. It is not that Tupperware all of a sudden discovered a cure for cancer or gave us any other positive news. It is simply moving up on buying by the meme crowd and the resulting short squeeze.
  • The initial trigger for the meme crowd buying TUP stock was a regulatory filing by Tupperware that it had identified multiple misstatements in its financial reports and material weaknesses in internal controls. Tupperware also said that it would have inadequate liquidity to fund its operations and might not be able to make principal and interest payments due on a loan.
• The first ten days of August are a seasonally weak period. The weak seasonality will confront the AI frenzy, FOMO, and buying on consensus of no landing. Keep in mind that the momo crowd and meme crowd are oblivious as their belief that stocks are going to surge is getting stronger.
• Two pieces of economic data ahead may be market moving:
  • July ISM Manufacturing Index will be released at 10am ET. The consensus is 46.8.  A number less than 50 is considered economic contraction. This number is especially important because the consensus in the stock market now is of no landing.
    • Investors have been focused on the data that supports no landing and have been ignoring the data that shows there is still a fair probability of a recession. How long can this continue?
    • In The Arora Report analysis, based on history this can continue until after the economy is in a recession. History tells us that investors become very optimistic before a recession.  
    • A good example is 2007.  In October 2007, The Arora Report called for an extremely high probability of a recession and a stock market crash. The protection band was at 100% protection level. The call was to buy inverse ETFs and aggressively short the market for those who could short. The consensus was of no recession and new highs in the stock market.  After The Arora Report call in October 2007, the stock market continued to go higher until, in 2008, the great financial recession occurred and S&P 500 lost about half of its value. Investors who were invested in the wrong sectors such as housing, savings and loans, and speculative stocks, lost 80% - 90% of their portfolios. With the proper use of inverse ETFs, The Arora Report generated a positive return of 40% during the stock market crash and a return over 80% for those who could short.  
  • JOLTS job openings report will also be reported at 10am ET.
• As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.

Blind Money

Blind money is the money that flows into Wall Street on the first two days of the month without any analysis and irrespective of stock market conditions. Blind money is typically invested in the afternoons. Wall Street professionals front run the blind money by buying in the morning and selling to blind money at inflated prices in the afternoon. However, in the early trade today, the stock market is under pressure due to the start of the weak seasonality period.

Momo Crowd And Smart Money In Stocks

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

Gold

The momo crowd is selling 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 to United States Dollar BTC/USD has fallen below $29,000.

Markets

Our very, very short-term early stock market indicator is negative. 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.