Nvidia – King Of AI Becomes King Of Stock Market

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

King Nvidia

Please click here for a chart of Invesco QQQ Trust Series 1 QQQ.

Note the following:

• The chart shows that QQQ touched the low band of the resistance zone and reversed.
• The chart shows that going into NVIDIA Corp NVDA earnings, QQQ has rallied to the downsloping trendline.
• RSI on the chart shows that the stock market is coming out of the oversold condition ahead of Nvidia earnings.
• The sum total of the foregoing is the technical setup for the stock market is positive going into Nvidia earnings.
• To fully understand the landscape going into Nvidia earnings, read the Morning and Afternoon Capsules from Monday and Tuesday.
• Today is one of those very rare days when earnings of a single stock become a macro event for the entire stock market.  Nvidia, king of AI, has now become the de facto king of the entire stock market. 
• Expect the momo crowd to aggressively buy call options on Nvidia, Advanced Micro Devices, Inc. AMD, Microsoft Corp MSFT, and VanEck Semiconductor ETF SMH today.
• Expect professionals to engage in position squaring. In plain English, this means that they are going to assess their risk related to Nvidia and adjust the positions held.
• Short sellers who were going to cover their shorts ahead of Nvidia earnings have already covered their shorts.
• Wall Street positioning is very positive. Positioning is one of the important market mechanics.  Understanding market mechanics can give you a big edge. Due to the high value of market mechanics, a majority of the truly helpful information is kept secret by those who know.  There are several podcasts that give you a deeper understanding of market mechanics in Arora Ambassador Club.
• After yesterday's 24.15% drop in the price of sporting goods retailer DICK'S Sporting Goods Inc DKS on a bad earnings miss, there is a shocking cut in earnings projections from Foot Locker Inc FL.  Foot Locker is falling 31.72% as of this writing in the premarket. In sympathy, shares of Nike Inc NKE, Under Armour Inc Class C UA, and Lululemon Athletica Inc LULU are coming under pressure.
• As shocking as earnings from DKS and FL are to the downside, earnings from teen apparel retailer Abercrombie & Fitch Co ANF are a blowout to the upside. ANF is reporting EPS of $1.10 vs. $0.17 consensus.  ANF stock is up 17.20% as of this writing in the premarket.
• The stock of Peloton Interactive Inc PTON, the pandemic darling of the momo crowd, is falling 27.61% as of this writing to $5.06 on poor earnings and loss of subscribers. Our long time members may recall that when PTON was trading about $170, almost all analysts were recommending strong buy. The Arora Report was cautioning against buying PTON, and the call was to look for opportunities to short sell PTON. Subsequently The Arora Report gave a short sell signal on PTON, and the trade was very profitable.
• Prudent investors also realize that right after Nvidia earnings there is a risk event ahead in Powell’s speech at Jackson Hole on Friday.
• 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.

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, NVIDIA Corp NVDA, and Tesla Inc TSLA.

In the early trade, money flows are mixed 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 🔒 in the early trade.

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Gold

The momo crowd is buying gold in the early trade. Smart money is 🔒 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

API crude oil inventories came at a draw of 2.418M barrels vs. a consensus of a draw of 2.9M barrels.

The momo crowd is selling oil in the early trade.  Smart money is 🔒 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.

Markets

Our very, very short-term early stock market indicator is positive but can quickly turn 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.

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.