Retail Investors Betting Money On A Trump Win, Meta To Challenge Google Search Dominance

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

Aggressive Retail Investor Bets

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

Note the following:

• The Morning Capsule is about the big picture, not an individual stock.  The chart of GOOG stock is being used to illustrate the point.
• This stock market has been highly concentrated in the Mag Seven stocks.
• The stock market has been ignoring the risks in the Mag Seven.
• Here is an illustration of the risks to the Mag Seven stocks.  Google has dominated search with over 90% of the market share.
• Microsoft Corp MSFT Bing has only nominal market share.  Microsoft has been gearing up to challenge Google with its Copilot.  Many newcomers such as OpenAI and Perplexity are also going after Google.  Now, Meta Platforms Inc META the parent of Facebook and Instagram, plans to go after Google with its own web crawler. 
• The chart shows GOOG stock is nowhere near the high it made back in July.  This has occurred at a time when S&P 500 has made a new high (SPX).
• The chart shows that GOOG stock has been struggling to even get into the lower resistance zone.
• The chart shows that yesterday GOOG stock broke into the lower resistance zone above the lower band of the resistance zone.  The chart shows the attempt failed.
• The sum total of the foregoing for investors is that as dominant as the Mag Seven stocks are, there are challenges ahead for the Mag Seven.  It is important for investors to diversify beyond the Mag Seven stocks. The easiest way to properly construct your portfolio is to take a close look at The Arora Report Model Portfolios.
• Alphabet reports earnings after the close.
• Even though the election outcome is uncertain, retail investors are aggressively betting their money that Trump will be the winner.  Retail investors are rushing into the Trump trade. An example of a Trump stock is Trump Media & Technology Group Corp DJT. DJT stock is up about 16% as of this writing in the premarket after jumping 21.59% yesterday.  Another example of Trump trade is cryptos.
• The momo crowd has been rushing into home builder stocks in anticipation of lower rates.  However, as a member of The Arora Report, you knew ahead of everyone else that our call was that rates would rise.  To the dismay of the momo crowd, the largest home builder in the U.S. DR Horton Inc (NYSE: DHI) sees FY25 revenues of $36B – $37.5B vs. $39.41B consensus.  DHI is falling about 12% as of this writing in the premarket, causing huge losses for the momo crowd.  DHI stock has been heavily promoted by momo gurus.  
• Earnings from five Mag Seven stocks are ahead.  Also ahead is important economic data.
• As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.  Please scroll down to see the protection band. The protection band is one of the large number of unique edges that are available to members of The Arora Report.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Alphabet (GOOG) and Tesla Inc TSLA.

In the early trade, money flows are neutral in Amazon.com, Inc. AMZN, Microsoft Corp (MSFT), and Meta (META).

In the early trade, money flows are negative in Apple Inc AAPL and NVIDIA Corp NVDA.

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

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 trading over $71,000 on aggressive retail investor bets that Trump will win.

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.