Nvidia Fever Stops Rising, Target Shows Consumer Resilient, Annual Jobs Revision May Move Markets

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

Resilient Consumer

Please click here for an enlarged chart of Target Corp TGT.

Note the following:

• This article is about the big picture, not an individual stock.  The chart of TGT stock is being used to illustrate the point.
• The U.S. economy is 70% consumer based.  Therefore, prudent investors keep a close eye on consumer behavior.  Lately, there has been a lot of conflicting data about the consumer.
• This morning, there is new data about consumer behavior from earnings from Target, Macy's Inc M, and TJX Companies Inc TJX.  TGT earnings are the most important.
• The chart shows a big jump in TGT stock this morning after it reported earnings.
• RSI on the chart shows that the stock is now overbought.
• As full disclosure, The Arora Report may give a signal to buy TGT on a pullback.  If a signal is given it will be part of The Arora Report's ZYX Buy portfolio.
• Here are the key points from Target earnings:
  • Target reported Q2 earnings of $2.57 vs. $2.18 consensus.
  • Q2 comp sales increased by 2% vs. a guide of 0% – 2%.
  • Target is raising FY25 EPS guidance.
  • Target cut prices on 5,000 items.  The consumer is recognizing the price cuts, and traffic has increased.
  • Apparel was a standout performer.  The consumer is facing pressure and looking for value.
  • Inventory turnover has increased.
• Previously, we shared with readers that Walmart Inc WMT recently also had strong sales and made comments similar to the ones from Target.
• Earnings from Macy's are below expectations.  However, in The Arora Report analysis, Macy's is an outlier.
• Earnings from TJX are above expectations.
• We previously shared with readers that there has been aggressive buying in NVIDIA Corp NVDA as investors build positions ahead of Powell's speech at Jackson Hole on Friday and Nvidia earnings on August 28.  Temporarily, NVDA fever has stopped rising.
• A big data release is ahead at 10am ET.  The release is the annual revision to jobs data.  This data may be market moving.  Investors should remember that the data for the year is through March and does not include the recent data.  The consensus is that the data will show that jobs growth was weaker than previously reported.  Estimates for weaker job growth are very wide, ranging from 300,000 to over 1M.  
  • In The Arora Report analysis, the report may impact what Powell says at Jackson Hole on Friday.  
• FOMC meeting minutes will be released at 2pm ET and may also move the market.

Magnificent Seven Money Flows

In the early trade, money flows are positive in NVDA, Amazon.com, Inc. AMZN,  Meta Platforms Inc META, Microsoft Corp MSFT, and Tesla Inc TSLA.

In the early trade, money flows are neutral in Apple Inc AAPL.

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

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

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.

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.