Google Breakup On The Table, Nvidia AI Summit Moves The Stock But Resistance Ahead

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

Google Breakup?

Please click here for an enlarged chart of Alphabet Inc Class C GOOG.

Note the following:

• This article is about the big picture, not an individual stock. The chart of GOOG stock is being used to illustrate the point.
• One of the concerns about big tech is that big tech has profited from monopolistic practices, and as such, the government will move against big tech. So far, these concerns have been limited to smart money. The momo crowd has been oblivious and aggressively buying big tech, running the stocks up higher and higher.  The reason is that the momo crowd does not do much analysis. The momo crowd is driven by momentum and hopium.
• The news is that the Department of Justice (DOJ), in a court filing, has put the breakup of Google on the table.  Previously, the judge had ruled that Google is a monopolist and established its monopoly with illegal practices.
• The chart shows that there has not been much of a reaction to the news.
• The chart shows that previously there was some downward reaction to the news that a judge ordered Google to open the app store to competition.
• Google faces a separate lawsuit threatening the breakup of its online advertising business.
• The chart shows that volume was low on the threat of a breakup and also on the order to open the app store. This indicates that so far the stock market does not believe the news will harm Google. This is for two reasons:
  • There is flawed analysis in the market that the sum of the parts is more than the current stock price. In The Arora Report analysis, the reason that the belief in the stock market is wrong is because the parts as separate companies will be restricted from continuing illegal monopolistic practices.
  • The election is only a few weeks away. The belief in the stock market is that both Trump and Harris will be friendly to big tech.
• NVIDIA Corp NVDA stock has staged a strong move leading to and in response to its AI Summit. However, the resistance zone is around $140, only $6 away. If NVDA stock breaks above the resistance zone, it will be a big positive for the stock market, especially AI stocks. On the other hand, if this rally fails to break above the resistance zone, it will be a negative.
• There are rumors of a potential ceasefire in Lebanon. Hezbollah has publicly endorsed ceasefire efforts. This is leading to selling in oil, gold, and Treasuries.
• FOMC minutes will be released at 2pm ET.

China

Stocks in China experienced another sell-off. More stimulus news is expected on Saturday.

Magnificent Seven Money Flows

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

In the early trade, money flows are neutral in Meta Platforms Inc META, Apple Inc AAPL, and GOOG.

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

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.