Will Tesla’s Giant Move Help NASDAQ Break Out?

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

Nasdaq Breakout?

Please click here for a chart of Invesco QQQ Trust Series 1 QQQ.

Note the following:

• The chart shows QQQ is in the resistance zone.
• The chart shows that QQQ moved up on giant Tesla Inc TSLA earnings.  Please see yesterday’s Morning Capsule for details on Tesla earnings.  After earnings, Tesla added a giant gain of $150B to its market capitalization.
• Bulls are hoping that giant Tesla earnings combined with a potential short squeeze today will cause QQQ to breakout above the resistance zone.
• Prudent investors should note that while S&P 500 has broken out, Nasdaq 100 has not.  Lately, tech stocks have lagged.  This is a reminder that it is important to diversify beyond tech stocks.
• RSI on the chart shows that QQQ is a long way from being overbought, and thus it will be easier to push it higher.
• In The Arora Report analysis, next week there are important big tech earnings.  These earnings will determine how QQQ behaves.  
• This morning more buying is coming into the stock market after the release of durable goods orders.
  • Durable Orders came at -0.8% vs. -0.9% consensus.
  • Durable Orders Ex-Transport came at 0.4% vs. -0.1% consensus.
• University of Michigan consumer sentiment will be released at 10am ET.  This data may be market moving.  Consumer sentiment is important because the consumer is 70% of the U.S. economy.
• As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band. The protection band is one of the large number of unique edges that are available to members of The Arora Report.

Japan

A general election will be held in Japan this Sunday.  There is a risk of the ruling party losing control of parliament.  In The Arora Report analysis, if the ruling party loses control of parliament, there is a fair probability that it will be negative for the yen and Japanese stocks.

Europe

The European Central Bank’s (ECB) Chief Economist is out saying that inflation in Europe is expected to reach the central bank’s target in 2025.

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, Microsoft Corp MSFT, and NVIDIA Corp NVDA.

In the early trade, money flows are neutral in TSLA.

In the early trade, money flows are negative in Apple Inc AAPL.

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.