All Eyes On Microsoft, The Fed Meeting Begins, Venezuela Fraud

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

All Eyes On Microsoft

Note the following:

Please click here for an enlarged chart of Microsoft Corp MSFT.

• This article is about the big picture, not an individual stock. The chart of MSFT stock is being used to illustrate the point.
• The chart shows that MSFT stock has given up all of its gains since the breakout.
• The chart shows that MSFT is now back to the top band of the support zone.
• RSI on the chart shows that MSFT stock is now technically oversold and can easily bounce if earnings are better than expected.
• Microsoft will report earnings after the close today. MSFT stock has run up on AI frenzy. In The Arora Report analysis, investors should focus on the following in Microsoft's earnings and conference call:
  • Azure growth in the last quarter
  • Projected Azure growth in the current quarter
  • Projected Azure growth for the year
  • Monetization of Copilot
  • AI related capital expenditures and what will be the return on those expenditures
• As full disclosure, MSFT stock is in the ZYX Buy Model Portfolio from The Arora Report. 
• In The Arora Report analysis, Microsoft earnings will be the major determinant of the AI trade. Technicals are set up for AI stocks to stage a rally from here. However, it will take better than expected earnings from Microsoft to trigger the rally.  If Microsoft earnings are disappointing, it does not automatically mean another leg down in AI stocks as investors will wait for earnings from Meta Platforms Inc META, Amazon.com, Inc. AMZN, and Apple Inc AAPL.
• The FOMC meeting is starting today. FOMC will announce it's decision at 2pm ET tomorrow followed by Powell's press conference at 2:30pm ET.
• The Bank of Japan is also meeting. More important than the Fed decision is the Bank of Japan's decision as the Bank of Japan's decision has major implications for U.S. stocks.
• JOLTS job openings and consumer confidence will both be released at 10am ET and may be market moving.

Magnificent Seven Money Flows

In the early trade, money flows are positive in AAPL, AMZN, and Alphabet Inc Class C GOOG.

In the early trade, money flows are neutral in META, NVDA, and MSFT.

In the early trade, money flows are negative in 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

Investors can gain an edge by knowing money flows in SPY and QQQ. Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust GLD.  The most popular ETF for silver is iShares Silver Trust SLV. The most popular ETF for oil is United States Oil ETF USO.

Bitcoin

There is some disappointment among Bitcoin BTC/USD bulls as they were expecting bitcoin to breakout after Trump's plan to drive bitcoin to the moon. Instead of breaking out, bitcoin appears to be seeing money outflows. So far, there is not clear evidence that bitcoin whales have been selling and taking advantage of excitement by retail investors. However, whales are very good at hiding their selling activity.

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 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 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.