Wall Street Comes To Nvidia's Defense After Biggest Loss Ever - Apple (NASDAQ:AAPL)

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

Largest Market Cap Loss Ever

Please click here for an enlarged chart of NVIDIA Corp NVDA.

Note the following:

The chart shows the drop in NVDA stock stopped before it reached the mini support zone.
Volume shown on the chart is very heavy, indicating conviction in the pullback.
RSI on the chart shows that NVDA is not oversold, indicating there is more room to the downside.
Yesterday, NVDA lost $589B in market cap. This is the largest one day loss ever for any company.
Yesterday illustrates the importance of diversification and proper portfolio construction. At this time, many retail investors are almost exclusively in AI stocks – such investors suffered massive losses yesterday. The Arora Report Model Portfolios are illustrations of how to properly construct portfolios using over 50 different strategies.
Wall Street is coming to Nvidia's defense. In The Arora Report analysis, further clarity is needed. Nvidia issued a statement on DeepSeek, but the statement does not provide any clarity probably because Nvidia is in a quiet period prior to earnings.
Americans are willy-nilly installing DeepSeek without realizing it is opening their entire device to China. DeepSeek is the most popular app in the Apple App Store.
Before the stock market opened yesterday, The Arora Report shared with you that Wall Street woke up after about a month after the prior version of DeepSeek was made available at Christmas time. We also shared with you our skepticism about the cost of $6M for DeepSeek.
Upon further analysis, The Arora Report now has high conviction that the stated cost of DeepSeek is highly misleading. This is important because it is the stated low cost figure that panicked Wall Street.
For the first time in 20 years, three remarkable things happened yesterday when S&P 500 declined 1.5%:
- The number of rising stocks far surpassed the number of declining stocks, 350 vs. 152.
- Value stocks surged.
- Invesco S&P 500 Eql Wght ETF RSP was little changed.
In The Arora Report analysis, instead of going into cash, investors exited AI stocks and bought value stocks.
Chips stocks are rising on a suggestion that Trump will place tariffs on imported chips.
There is also a report of Trump potentially imposing a universal tariff of at least 2.5%.
Those in the momo crowd who exclusively buy out of money call options on popular stocks have seen their accounts completely wiped out. In our decades in the markets, we have seen this again and again – many in the momo crowd make a lot of money by recklessly buying options and then go on to lose their entire accounts.
Those in the momo crowd who still have money are aggressively buying NVDA, Advanced Micro Devices Inc AMD, Cameco Corp CCJ, Oklo Inc OKLO, Nano Nuclear Energy Inc NNE, SoFi Technologies Inc SOFI, Palantir Technologies Inc PLTR, Rigetti Computing Inc RGTI, Quantum Computing Inc QUBT, and WiMi Hologram Cloud Inc – ADR WIMI. WIMI announced it will use DeepSeek, catching the attention of the momo crowd.
In The Arora Report analysis, it is important to understand that irrespective of how cheap it may be, corporate America is not going to make a Chinese model like DeepSeek the backbone of their AI efforts.
Looking forward, we will be careful listening to earnings calls from Amazon.com, Inc. AMZN, Microsoft Corp MSFT, Alphabet Inc Class C GOOG, Meta Platforms Inc META, and Tesla Inc TSLA to see if they are making changes to their capital expenditure plans after DeepSeek.
Durable goods came weaker than expected.
- Durable goods came at -2.2% vs. 0.4% consensus.
- Durable goods ex-transportation came at 0.3% vs. 0.5% consensus.
Consumer confidence will be released at 10am ET and may be market moving.
The FOMC meeting starts today. The rate decision will be announced tomorrow at 2pm ET, followed by Powell's press conference at 2:30pm ET.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Alphabet (GOOG), Meta (META), and Nvidia (NVDA).

In the early trade, money flows are neutral in Apple Inc AAPL, Microsoft (MSFT), and Tesla (TSLA).

In the early trade, money flows are negative in Amazon (AMZN).

In the early trade, money flows are neutral 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 was first sold yesterday along with tech stocks. The dip under $100K was bought. As of this writing, bitcoin has stabilized over $100K.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror. The proprietary protection band from The Arora Report is very popular. The protection band puts all of the data, all of the indicators, all of the news, all of the crosscurrents, all of the models, and all of the analysis in an analytical framework that is easily actionable by investors.

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.

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