Make Or Break Moment For AI Frenzy Ahead – Nvidia Earnings, Hopes Dashed In U.K.

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

Make Or Break Moment

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.
• NVDA is the most important stock in the market as Nvidia is the epicenter of the AI revolution.
• The chart shows NVDA has been consolidating.
• NVDA will report earnings after the market close today. Here are the key points:
  • A move of about 7% is expected in either direction.
  • Before the prior set of earnings, on the average a move of 13% in either direction was expected.
  • In The Arora Report analysis, NVDA is likely to beat the consensus numbers.
  • In The Arora Report analysis, the key question is if NVDA will beat the whisper numbers. Whisper numbers are much higher than the consensus numbers. Whisper numbers are numbers that analysts make available only to their best clients and are not publicly available. 
  • In The Arora Report analysis, another key point will be product transition to Blackwell. For example, Amazon.com, Inc. AMZN has stopped buying NVDA GPUs as it waits for Blackwell.  
• NVDA earnings will dictate not only the future course of AI stocks but also the entire stock market.
• There are two earnings of note for investors this morning.
  • Analog Devices, Inc. ADI, a major analog semiconductor company, reported earnings better than whisper numbers. The stock is rising about 6% in the premarket. ADI is long from $83.25. It was trading at $228.22 as of this writing in the premarket.
  • Target Corp TGT reported earnings less than whisper numbers. TGT stock is down about 10% as of this writing in the premarket. TGT is losing share to Walmart Inc WMT.  As full disclosure, WMT is in the ZYX Buy core Model Portfolio.
• FOMC meeting minutes will be released at 2pm ET and may be market moving. As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band. The protection band is one of the large number of unique edges that are available to members of The Arora Report.

Hopes Dashed In The U.K. 

Historically, the data in the U.K. precedes the U.S.  For this reason, prudent investors pay attention to U.K. data to gain an edge.  

The momo crowd has been aggressively buying U.K. stocks on their belief of a certainty of a rate cut in June.

This morning, those hopes appear to be dashed on hotter inflation data. Here are the details:

• Headline CPI  came at 0.3% vs. 0.2% consensus.
• Core CPI came at 0.9% vs. 0.7% consensus.

Magnificent Seven Money Flows

In the early trade, money flows are positive in AMZN, Meta Platforms Inc META, and NVDA.

In the early trade, money flows are neutral in Apple Inc AAPL and Microsoft Corp MSFT.

In the early trade, money flows are negative in Alphabet Inc Class C GOOG and Tesla Inc 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

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

Note for new members: 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 like a yoyo 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 range bound as exuberance about a potential ether ETF continues.

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.