Essential updates for savvy investors.

Key Insights from Recent ADP Data

Please click here for an enlarged chart of Advanced Micro Devices, Inc. AMD.

Here are the main takeaways:

• This article focuses on broader market trends rather than individual stocks. The chart of AMD is just an example.
• The chart indicates that momentum investors were buying AMD shares the day before its earnings report.
• It also shows when the earnings report was released.
• Following the earnings announcement, AMD’s stock price dropped. The chart reflects a shift in the proprietary Arora Report VUD indicator to orange, indicating increased supply for AMD.
• AMD reported earnings that matched analysts’ expectations and offered reasonable guidance. Despite this, the stock price declined because whisper estimates for GPU sales in AI approached $6B, while AMD forecasted over $5B for 2024, aligning with consensus views. As previously mentioned, stock movements are often influenced by the gap between reported and whispered figures.
• The company fell short of the whisper numbers, as despite having strong AI chips, AMD lacks the comprehensive software solutions available from NVIDIA Corp NVDA. This limitation restricts AMD’s potential growth, even with lower pricing than Nvidia. AMD recently acquired a systems company to enhance its position, but The Arora Report suggests it may take a significant amount of time to catch up with NVDA, which has a well-established platform, CUDA, used by a vast number of developers in AI.
• Alphabet Inc Class C GOOG released earnings reports after market close. Their results indicate growth in data centers and, consequently, in AI. However, The Arora Report warns of risks associated with GOOG stock, noting Google’s dominance in the search market could hinder further growth. A small decrease in market share could adversely impact earnings.
• Upcoming earnings from Microsoft Corp MSFT and Meta Platforms Inc META will also draw attention. Stocks are likely to fluctuate based on how effectively these companies are monetizing AI.
• The Arora Report has consistently noted the potential for wealth creation through AI, emphasizing the need for thorough knowledge as the landscape can be unpredictable. An example is Super Micro Computer Inc SMCI, where a previous bullish sentiment resulted in a price projection of $120, while The Arora Report estimated a fair value between $44-48. Currently, SMCI has fallen approximately 33% to around $32 amid news of an independent auditor’s resignation.
• Recently released GDP figures indicate economic strength, though they slightly missed expectations. Being a lagging indicator, GDP data provides limited insight compared to more predictive metrics. Current details include:
  • Q3 GDP-Advance came in at 2.8%, versus a 3.0% consensus estimate.
  • Q3 Chain Deflator-Advance reported 1.8%, below the 2.3% consensus.
• Automatic Data Processing Inc ADP reported strong job growth. As the largest payroll processor, it gives an early insight into employment trends ahead of the official jobs report set to release at 8:30am ET on Friday. The Arora Report suggests that a robust jobs report could diminish the likelihood of an interest rate cut by the Fed in the near future.
  • ADP employment change was 223K, far exceeding the 105K consensus.
• This data from ADP contradicts the rationale behind the Fed’s recent 50 basis point interest rate cut. As noted in previous analyses, the majority of recent data does not support the Fed’s decision.
• In a disappointing turn, Eli Lilly And Co LLY reported earnings below consensus, causing its stock to drop roughly 10% in premarket trading. In reaction, Novo Nordisk A/S NVO stock also declined. Both companies have recently seen significant stock price increases linked to weight loss treatments. For full transparency, LLY is included in The Arora Report’s ZYX Buy Core Model Portfolio, initially at $318.45, and is currently trading at $807.
• Tomorrow’s economic releases will include jobless claims, personal income and spending data, and the Fed’s preferred inflation measure, the PCE index, at 8:30am ET.

Money Flow Trends for the Magnificent Seven

In early trading, positive money flows can be observed in Amazon.com, Inc. AMZN, MSFT, GOOG, and META.

Conversely, stocks like Apple Inc AAPL, Tesla Inc TSLA, and NVDA are seeing negative inflows.

Additionally, negative money flows are present in the SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust Series 1 QQQ.

Understanding Momo Crowd and Smart Money Dynamics

To gain insights, investors should track the money flows in SPY and QQQ. A deeper advantage comes from identifying when smart money is moving stocks, gold, and oil. The most favoured gold ETF is SPDR Gold Trust GLD, while silver’s is iShares Silver Trust SLV. The leading oil ETF is United
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Market Insights: Navigating Current Investment Strategies

Oil ETFs: Current Status

States Oil ETF USO remains a focal point for investors.

Bitcoin Market Trends

Bitcoin BTC/USD is currently experiencing a period of price stability.

Establishing a Protection Band

Investors should prioritize future opportunities rather than dwelling on past performance.

Maintaining strong, long-term positions may be wise. Depending on your risk tolerance, consider implementing a protection band that includes cash, Treasury bills, short-term tactical trades, and hedges for various time frames. This balance can help manage risk while still enabling potential gains.

Your protection bands can be customized by blending cash with hedges. The upper band is suitable for older or conservative investors, while the lower band fits younger or more aggressive ones. If no hedging is done, your cash level should exceed the recommended amounts but remain notably below the cash plus hedges total.

A 0% protection band signals a bullish outlook, indicating a full commitment to investments without cash reserves. Conversely, a 100% band suggests a bearish stance, indicating a need for significant protective measures, including cash and hedges or heavy short selling.

Remember, lacking adequate cash reserves limits your ability to capitalize on emerging opportunities. When fine-tuning your hedges, adjust your stop quantities for stock holdings (not ETFs); consider using wider stops on what remains and allowing more flexibility for high beta stocks, which tend to fluctuate more than the broader market.

Evaluating the Traditional 60/40 Portfolio

Current risk-reward projections, adjusted for inflation, do not favor long-dated strategic bond allocations.

Investors adhering to the traditional model of 60% stocks and 40% bonds should shift their focus to high-quality bonds or those with five-year durations or shorter. For those looking to enhance their investing approach, using bond ETFs for tactical purposes rather than strategic long-term bets may be advisable.

The Arora Report is recognized for its accurate market predictions. It anticipated the significant AI rally, the bull market of 2023, the bear market in 2022, and other major market trends. To keep updated, consider signing up for the free Generate Wealth Newsletter.