Data From Walmart's Earnings Runs Counter To Stock Market Bulls' Hopium

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

Tepid Consumer

Please click here for an enlarged version of the chart of Walmart Inc WMT.

Note the following:

• The Morning Capsule is about the big picture, not an individual stock. The chart of WMT stock is being used to illustrate the point.
• The U.S. economy is 70% consumer based, and Walmart is the largest retailer in the U.S. Therefore, investors should pay close attention to Walmart.
• The chart shows the stock is going higher as of this writing.
• The chart shows when Walmart reported earnings. Walmart beat earnings estimates for the last quarter. Here are the details:
  • Q4 revenue came at $173.4B vs. $158.4B consensus.
  • Walmart hit $100B in e-commerce sales.
  • Q1 adjusted EPS came at $1.48-$1.56 vs. $1.48 consensus.
  • Dividend increased by 9%.
• The stock market has held up, in part, due to excess consumer spending.
• Stock market bulls are counting on excess consumer spending continuing.
• Walmart earnings are painting a tepid picture of the consumer. Walmart says shoppers are staying “choiceful.” The data from Walmart runs counter to stock market bulls’ hopium of the consumer continuing to spend excessively.
• Walmart stock is running up, in part, because Walmart is buying Vizio Holding Corp VZIO to expand advertising. VZIO is in the ZYX Buy portfolio that surrounds the Model Portfolio, and VZIO is the 191st Arora Portfolio company to be bought out.  
• As we have stated before, the most critical item for the stock market is NVIDIA Corp NVDA earnings. For details, please see the Morning Capsule from February 14.
• 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 neutral in Microsoft Corp MSFT.

In the early trade, money flows are negative in Apple Inc AAPL, Amazon.com, Inc. AMZN, Alphabet Inc Class C GOOG, Meta Platforms Inc META, NVIDIA Corp, 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.

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 aggressively 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 BTC/USD is volatile and trading above $52,000.

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.

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 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.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.