Nigam Arora on SPX & NDX Money Flows, MU Earnings Next Test for Tech

SPEAKER_1 (0:00)

Let's bring Miley back into the conversation, turn our attention to the trends in this current market with Nigam Arora, founder of the Arora Report. Nigam, good afternoon to you. Interesting moves we've seen this week. I mean, particularly given this is meant to be what? The toughest week in one of the toughest months of the year. We've seen that momentum rebound and this shift from the MAG-7, which had been underperforming over the summer, to now outperforming and reestablishing leadership. What do you make of it?

Nigam Arora (0:27)

Well, thank you, Sam, for having me. And excellent question which everybody is asking for. So what happened is, you're right, September is traditionally week month, but everything went up, was in the kind of risk-off mode leading to the Fed. And once Fed was over, irrespective of what Fed did, that hangover was over. And then the narrative shifts to our earnings, which are coming next month. And what we have seen is, in the first quarter of this year, earnings came out not stronger than consensus. And stocks ran, especially the AI stocks. And the same thing happened in the second quarter.

So now the expectation is that the third quarter earnings, which we're gonna start seeing in October, but before that, we were tested with Micron, September 30th, are going to be a lot stronger and the stocks are going to run. And of course, then the macro has deteriorated overall. Of course, I do understand the news of good conversations, Iranians and all that.

So when investors see the macro is deteriorating, and but earnings are gonna be strong, they look at where are the stronger news is going to be, and they're going to be concentrated in Mag 7, precisely your question, and semiconductors. So starting last week, we have proprietary money flow analysis, and we kind of dissect between momentum crowd and other segments. And the momentum crowd money flows, we call them Momo crowd, were extremely strong starting last week, and they've continued to build. So that's what's going on. In the short term, it's a money flow game.

SPEAKER_3 (2:08)

And so, Nigam, what are you seeing in flows right now that's telling you about how investors are positioning for the earning season that we have kicking off? Because I mean, as we're in the lull, we start to see some of this positioning. And how much are you viewing as being already priced in because of the better than expected earning season we just had?

Nigam Arora (2:27)

Right. So it's not priced in at all yet.

So from what we are seeing the flows, right? So flows are pretty fickle. They're like weather. They can switch very, very quickly. But the strength of the flow we're seeing, if those flows continue, the Mach 7 and the semiconductor stocks can go much, much higher, at least going into September 30th, which is the Micron earnings. So that's what we're seeing right now. But remember, flows are very, very short-term. They don't tell you what's going to happen a year from now. They can switch just like the weather does, you know, just change.

SPEAKER_1 (3:08)

What do you make of the CPU that's really gripped the stock market? I mean, it's amazing the difference a week can make. I mean, last Monday, Nigam, we came into trading fresh week here, freaking out about AI slowdown talk and perhaps this coordinated approach to trying to stymie the development here and now you've got this buzz around the Muse AI agent and things are taking off again. I mean, Taiwan hit a record last night.

Nigam Arora (3:35)

Right, right. So, you know, Sam, you're a great background in Asia and, you know, I do a lot of work in Asia.

And I think in my last appearance or maybe the one before, you know, I think I said that some of the greatest opportunities are in Asia. You know, we were positioned in Taiwan, we were positioned in Korea. They're absolutely going gangbusters. And it's all about positioning, to think about it, going into the Fed, as you said, just a week ago, all the doom and gloom, AI safety and all that. So positioning became negative, a lot of institutional investors and we monitored institutional money flows, were kind of trimming, trimming, trimming. And then once the Momo crowd starts buying aggressively, market starts moving up, then institutions have to chase.

If you look at the yesterday's move, for example, if you look at the yesterday's NASDAQ move, it's steady, up, up, up, up, up, up, up, right? Today is not as steady. And why is that happening? Because institutions these days are smart, right? In the older days, they would say, buy me 50,000 shares of Microsoft. Nobody does that now, right? Because everybody has all goals, they're breaking down in thousand shares. So the money gets deployed very, very slowly. I mean, yesterday, pre-market, before we said, hey, there's going to be a rally because the money flows are so strong. And so institutions are deploying the capital, the momentum crowd is going insane.