Biggest Even Microsoft Buyback, New Retail Sales Go Against Prevailing Wisdom, Trump Crypto Project

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

Against Prevailing Wisdom

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

Note the following:

• 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 after touching the low band of the support zone, MSFT stock has moved up in a straight line.
• The chart shows the move up in the early trade on three announcements:
  • Microsoft is announcing a new $60B stock buyback program.  This matches the largest buyback program ever from Microsoft.
  • Microsoft is increasing the dividend by 10%.
  • Microsoft is introducing more AI features in Office 365 and a new collaborative tool named Copilot Pages.  This new tool allows users to collaborate and edit data taken from Copilot on a single page. The company is also introducing a new agent builder allowing users to build AI powered agents.
• As full disclosure, Microsoft is in The Arora Report’s ZYX Buy Core Model Portfolio. The Arora Report has just issued a new buy zone.
• Investors are seeing the news from Amazon.com, Inc. AMZN as return to normalcy after the pandemic – Amazon will require workers to be at the office five days a week.
• The stock market is running as Wall Street positions for a 50 bps rate cut. 50 bps rate cut has now become the prevailing wisdom.
• Prudent investors closely watch retail sales data as the U.S. economy is 70% consumer based.  In The Arora Report analysis, the data just released is very important because it is the last piece of economic data that the FOMC is going to see before making its rate decision tomorrow.  In The Arora Report analysis, the just released retail sales data does not support a 50 bps cut.  Here is the latest retail sales data.
  • Headline retail sales came at 0.1% vs. -0.2% consensus.
  • Retail sales ex-auto came at 0.1% vs. 0.2% consensus.
  • Prior retail sales were revised to 1.1% from 1.0%.

Magnificent Seven Money Flows

In the early trade, money flows are positive in AMZN, MSFT, Alphabet Inc Class C GOOG, Meta Platforms Inc META, NVIDIA Corp NVDA, and Tesla Inc TSLA.

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

In the early trade, money flows are positive 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

Trump has released details of his crypto project. The project is called World Liberty Financial.  63% of the coins will be bought by the public, 20% will be owned by the founding team, and 17% will be for user rewards.

The release of Trump's crypto project details is bringing in buying in all cryptos, including Bitcoin BTC/USD.

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.