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

No Landing

Please click here for an enlarged chart of American Express Company AXP.

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

Note the following:

• This article is about the big picture, not an individual stock. The charts of AXP and NVDA stocks are being used to illustrate the point.
• American Express CEO Stephen Squeri said that he sees “no landing” for the U.S. economy. In plain English, no landing means the economy continues to grow without a major slowdown. American Express has about 55M cardholders in the U.S. Spending on these cards provides a good data point.
• American Express CEO’s statement is another data point showing that the Fed spiked the punch with the 50 bps interest rate cut.
• The AXP chart shows a strong trendline.
• The AXP chart shows an RSI divergence. In plain English this means that as the price has moved higher, RSI is showing lower peaks. This indicates a lack of internal momentum. RSI divergence often leads to a pullback.
• AXP reported earnings better than the consensus but less than whisper numbers.
• The AXP chart shows that after spiking higher, AXP stock is pulling back.
• In the big picture, the data points from American Express earnings are important because they reflect 55M affluent consumers.
• The NVDA chart shows that NVDA stock moved higher in the resistance zone after blowout earnings from Taiwan Semiconductor Mfg. Co. Ltd. TSM. TSM manufactures Nvidia’s AI chips. TSM indicated the demand for AI chips is strong.
• The NVDA chart shows the resistance proved to be too strong for NVDA stock to breakout yesterday.
• Prudent investors should carefully watch to see if NVDA stock breaks out above the resistance zone. If NVDA breaks out above the resistance zone, it would be positive for the entire stock market, especially AI stocks. On the other hand, if this NVDA rally fails, it will be a negative for the entire stock market.

Housing Starts

Housing starts came roughly in line but building permits dropped. Building permits are a leading indicator.  Investors should focus on leading indicators. Here are the details:

• Housing starts came at 1.354M vs. 1.350M consensus.
• Building permits came at 1.428M vs. 1.455M consensus.

China

China Q3 GDP came at 0.9% quarter-over-quarter vs. 1.0% consensus.

In The Arora Report analysis, even though China’s GDP is slightly weaker than expected, it is not of concern because GDP is a lagging indicator. New stimulus measures that we have been writing about are designed to lift GDP going forward. 

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon.com, Inc. AMZN, Alphabet Inc Class C GOOG, Meta Platforms Inc META, Apple Inc AAPL, and NVDA.

In the early trade, money flows are neutral in Microsoft Corp MSFT.

In the early trade, money flows are negative in Tesla Inc TSLA.

In the early trade, money flows are positive 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.