Benzinga - by The Arora Report, Benzinga Contributor.
To gain an edge, this is what you need to know today.
Nvidia Bounces Please click here for an enlarged chart of NVIDIA Corp (NASDAQ: NVDA).
Note the following:
- This article is about the big picture, not an individual stock. The chart of NVDA stock is being used to illustrate the point.
- The chart shows Arora’s call to hedge semiconductors including NVDA just before the blow-off top. This is as good as it gets in real life.
- The chart shows the Arora call that Nasdaq 100 internals were deteriorating on the exact day when the NVDA stock blow-off top occurred. The call was made in the Morning Capsule before the market open at a time when NVDA stock was making a new high.
- The chart shows the mini support zone for NVDA stock.
- The chart shows that NVDA bounced off of the top band of the mini support zone. NVDA stock touched the top band of the mini support zone in overnight trading. In some systems, the data for overnight trading may be missing.
- The chart shows from peak to trough NVDA fell about 18% before the bounce.
- As full disclosure, The Arora Report system triggered a Signal Limited for a trade around position when NVDA touched the top band of the mini support zone. However, the signal was triggered during overnight trading and was not published because most investors do not trade overnight. Now, the signal has been negated because the stock quickly bounced.
- The chart shows the next support zone. If NVDA stock dips to the next support zone, a signal may be given for a trade around position.
- As full disclosure, The Arora Report's core NVDA position is long from $12.55. The Arora Report's NVDA position is partially hedged and a signal may be coming to take partial profits on the hedge.
- What happens next will come down to Micron Technology Inc (NASDAQ: MU) earnings that will be reported tomorrow after the close. For details, please click here to read more in yesterday’s Morning Capsule, and please click here for a separate Micron article.
- Previously, it was Boeing Co (NYSE: BA). Now, Airbus SE (OTC: EADSY) is also faltering due to problems at suppliers.
- San Francisco Fed President Mary Daly is warning that the U.S. labor market is near an inflection point. If she is right, more layoffs are coming.
In the early trade, money flows are neutral in Meta Platforms Inc (NASDAQ: META) and Microsoft Corp (NASDAQ: MSFT).
In the early trade, money flows are mixed in SPDR S&P 500 ETF Trust (ARCA:SPY) and Invesco QQQ Trust Series 1 (NASDAQ: 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 (ARCA:GLD). The most popular ETF for silver is iShares Silver Trust (ARCA:SLV). The most popular ETF for oil is United States Oil ETF (ARCA:USO).
Bitcoin Bitcoin (CRYPTO: BTC) is bouncing after falling below $60,000.
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 seven 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.
This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.
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