JP Morgan Kicks Off Earnings Season, Intel And AMD China Problem, Potential Iranian Attack

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

High Expectations

Please click here for an enlarged chart of JPMorgan Chase & Co JPM.

Note the following:

• This article is about the big picture, not an individual stock. The chart of JPM stock is being used to illustrate the point.
• JP Morgan has kicked off earnings season.
• The chart shows that immediately after earnings release, JPM stock fell about 5%.
• The chart shows that the dip buyers immediately stepped in with aggressive buying.
• The chart shows the rising trendline after JPM reported earnings in January.
• The chart shows that after today’s earnings release the trendline is broken, at least temporarily.
• JPM reported EPS of $4.63 vs. $3.82 consensus. JPM reported revenues of $42.5B vs. $38.53B consensus.
• Even though JPM reported better than consensus, whisper numbers have been jacked up going into earnings. Whisper numbers are the numbers analysts privately share with their best clients. These numbers are often different from the numbers the same analysts publish. This is a technique used by analysts to generate business.
• The foregoing illustrates why you need to be very careful following Wall Street analysts unless you are one of their best clients. Prudent investors depend on independent, objective sources such as The Arora Report for analysis.
• Bank earnings are very complex. Here is a plain English analysis from The Arora Report of JPM earnings:
  • The quarter was fine.
  • The guidance was slightly less than expected.
  • Going forward, expenses will be higher than expected.
  • Going forward, NII will be slightly less than expected. NII is the difference in the interest income between what the bank charges borrowers and what the bank pays to depositors.
• As full disclosure, JPM is in The Arora Report ZYX Buy Model Portfolio. It is long from $34.14. 
• Citigroup Inc C reported earnings better than the consensus and better than whisper numbers. Citigroup is a restructuring story. So far, restructuring appears to be working.
• Citigroup is the most lucrative stock among major banks, but consider buying it only in the buy zone. As full disclosure, Citigroup is in the portfolio that surrounds The Arora Report Core Model Portfolio.
• Wells Fargo & Co WFC reported earnings better than the consensus but less than the whisper numbers.
• The take home message for investors is two fold:
  • Do not trust published estimates from Wall Street analysts. If you are their best client, focus on their whisper numbers or rely on independent sources such as The Arora Report.
  • The bar this earnings season is very high.  Since the economy has stayed strong, many companies will be able to meet the bar.  However, if the economy weakens, companies will start missing whisper numbers in future quarters.  It is important for investors to stay tuned to the macro data.
• Intel Corp INTC and Advanced Micro Devices, Inc. AMD have a new China problem. China is instructing its telecom carriers to stop using AMD and INTC chips.
• We have previously written that prudent investors should stay alert to a potential Iranian attack on Israel. Wall Street has become complacent and the momo crowd is oblivious. However, you need to know that there are intelligence reports indicating that Iran is preparing an attack.

Magnificent Seven Money Flows

In the early trade, money flows are neutral in Amazon.com, Inc. AMZN.

In the early trade, money flows are negative in Apple Inc AAPL, 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 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 selling stocks in the early trade.

Gold

Gold futures have crossed $2400 on intelligence reports of a potential Iranian attack.  

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

Oil futures are jumping on intelligence reports of a potential Iranian attack.  

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 BTC/USD is range bound.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.

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 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.