By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Best First Half Ever
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The trendline on the chart shows that the rip-roaring AI rally has slowed and QQQ has stopped its rapid ascent.
- RSI on the chart shows that the overbought condition has been relieved. Now, the stock market can go either way.
- Nasdaq was started in 1971. Nasdaq is set to finish the best first half of the year ever.
- The gain in Nasdaq is driven by the AI frenzy. The tech-heavy Nasdaq is up about 30% compared to only 2% for Dow Jones Industrial Average (DJIA) and only 14% for S&P 500 (SPX).
- The credit goes to the magnificent seven stocks. The magnificent seven stocks are Apple (AAPL), Amazon (AMZN), Alphabet (GOOG, GOOGL), Meta (META), Microsoft (MSFT), Nvidia (NVDA), Tesla (TSLA).
- Without the magnificent seven, the stock market is only slightly positive.
- No worries if you did not take advantage of the AI frenzy. There is plenty of time ahead to profit from AI over the next seven years. The most important action you can take is to develop your knowledge about investing in AI. Our over 30 years in the markets have demonstrated that investors with more knowledge perform significantly better compared to those who do not put in the effort to develop their knowledge.
- We are receiving a large number of requests to join Arora Ambassador Club as investors hear from their friends and colleagues that Arora Ambassador Club is the best way to develop AI investing knowledge. Currently, the club is not accepting new members. If you are interested in joining the club, please fill out the form below to get on the new waitlist.
- Investors often suffer from recency bias. For this reason, it is important to remember that Nasdaq dropped about 30% during the same period last year.
- Historically, when the first half is this strong, the second half is positive.
- Also historically, when the first half is this strong, the same stocks that worked in the first half tend to work in the second half.
- From a seasonality point of view, July tends to be a strong month. August often brings a rally. The market tends to experience a sell off in September and October. Typically, the market runs up in November and December.
- Investors should always be aware of the history and seasonality but should never invest based on these alone.
- Investors should consider using a comprehensive system such as the adaptive ZYX Asset Allocation Model with a long, proven track record. The model has inputs in ten categories. Please click here to see the ten categories. The model is adaptive in that it changes itself with market conditions. This is, in part, the secret behind The Arora Report’s success. Most models on Wall Street are static. They work for a while, and then they stop working when market conditions change.
- A simpler way to look at the market is in six dimensions. Here is the current status:
- Macro – negative
- Fundamentals – negative
- Technicals – very positive
- Quantitative – positive
- Sentiment – positive
- Liquidity – positive
- In The Arora Report analysis, liquidity is likely to start becoming negative later this year.
- As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.
GDP Surprise
Q1 GDP-third estimate came at 2.0% vs. 1.3% consensus. This indicates that the economy has been very strong in the first quarter. Keep in mind that this is a lagging indicator. The Arora Report system focuses on leading indicators.
Jobless Claims
Initial jobless claims came at 239K vs. 266K consensus. This is a leading indicator and carries heavy weight in the adaptive ZYX Asset Allocation model. The latest data is very strong, indicating a robust jobs picture. The jobs picture continues to be strong at the low end.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial) stocks in the early trade. Smart money is 🔒 in the early trade.
Gold
Unlike the stock market, gold is paying attention to the central bankers.
Gold is being sold after hawkish comments from central bankers from the U.S., E.U., and U.K. in the ECB forum in Sintra, Portugal.
The momo crowd is 🔒 gold in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin is range bound. There is speculation that whales will take advantage of the low liquidity holiday period to run up bitcoin to $32,000.
Markets
Our very, very short-term early stock market indicator is 🔒. This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.
Interest rates are ticking up, and bonds are ticking down.
The dollar is stronger.
Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.
Gold futures are at $1906, silver futures are at $22.76, and oil futures are at $69.25.
S&P 500 futures are trading at 4420 as of this writing. S&P 500 futures resistance levels are 4460, 4600, and 4713: support levels are 4400, 4318, and 4200.
DJIA futures are down 7 points.
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 holding 🔒 in cash or Treasury bills or allocated to short-term tactical trades; and short to medium-term hedges of 🔒, and short term hedges of 🔒. 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.
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.
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Nigam Arora
Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.
Dr. Natasha Arora
Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.
