Not World War III But New Russian Nuclear Doctrine Brings Selling In Stocks, Walmart Breaks Out

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

New Russian Nuclear Doctrine

Please click here for an enlarged chart of Walmart Inc WMT.

Note the following:

• This article is about the big picture, not an individual stock.  The chart of WMT is being used to illustrate the point.
• The U.S. economy is 70% consumer based.  Walmart is the largest retailer in the U.S.  For this reason, prudent investors pay attention to Walmart’s earnings.
• The chart shows WMT stock gapped up after earnings.
• The chart shows that WMT stock also gapped up on earnings in the prior two quarters.
• Walmart reported earnings better than the whisper numbers.  Stocks move based on the difference between reported numbers and whisper numbers.  Whisper numbers are the number analysts privately share with their best clients.  Whisper numbers are different from the numbers the same analysts publish for public consumption.
• In The Arora Report analysis, the following are the most important points from Walmart earnings:
  • Higher end consumers continue to shift to Walmart.
  • E-commerce at Walmart, especially quick delivery, is growing rapidly.
  • Margins are expanding.
  • Walmart is gaining market share.
• In The Arora Report analysis, as good as Walmart is doing, investors need to be mindful of the very high valuation for a retailer.  Walmart is trading at a trailing PE of 43.  However, as Walmart’s earnings are growing, forward PE is 30, which is still expensive for a retailer.
• As full disclosure, Walmart is in The Arora Report’s ZYX Buy Core Model Portfolio from an average price of $19.25. 
• Prudent investors also watch earnings from home improvement retailer Lowe’s Companies Inc LOW.  Lowe’s earnings are a reflection of the consumer, especially remodeling of existing homes.  Lowe’s earnings are slightly below whisper numbers.   As full disclosure, LOW is also in The Arora Report’s ZYX Buy Core Model Portfolio and is long from an average of $81.85.
• In the early trade, markets are responding to the new Russian doctrine.
  • Stocks are being sold.
  • Gold and silver are being bought.
  • Oil is being bought.
  • The dollar is being bought.
  • The yen is being bought.
• The new Russian doctrine brings the world closer to World War III.  The new doctrine is in response to the U.S. allowing Ukraine to fire U.S. manufactured long range missiles on targets inside Russia.
• Prudent investors should note the following three elements of the new Russian doctrine.
  • An attack on Russia by any country supported by a nuclear power will be considered a joint attack on Russia.
  • A massive aerial attack could trigger a nuclear response from Russia. 
  • In reference to NATO, an aggression by a member of the coalition will be viewed as aggression by the entire bloc.  
• In The Arora Report analysis, the new Russian doctrine is squarely directed at the U.S.  The purpose appears to be to persuade Trump to stop supporting Ukraine and force Ukraine to cede territory in Eastern Ukraine to Russia.  Further, in The Arora Report analysis, the ultimate solution is likely going to be the U.S. forcing Ukraine to give Eastern Ukraine to Russia as per Russian wishes.  This has been a long standing Arora call.
• For the first time ever, Ukraine has attacked a warehouse inside Russia using long range missiles manufactured by the U.S.   The missile attack was conducted with Army Tactical Missile System (ATACMS).  The missiles are manufactured by Lockheed Martin Corp LMT, a major U.S. defense contractor.  The targeted warehouse housed ammunition and missiles from North Korea.  North Korea is promising 100K troops to fight for Russia in Ukraine.
• There is no change in the protection band at this time, but we are keeping a close eye on the situation.

Housing

New housing is beginning to weaken.  Here is the just released data:

• Housing starts came at 1.311M vs. 1.34M consensus.
• Building permits came at 1.416M vs. 1.441M consensus.

Magnificent Seven Money Flows

In the early trade, money flows are positive in NVIDIA Corp NVDA.

In the early trade, money flows are negative in Apple Inc AAPL, Amazon.com, Inc. AMZN, Alphabet Inc Class C GOOG, Meta Platforms Inc META, Microsoft Corp MSFT, and Tesla Inc TSLA.

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 range bound.

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.