By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Financial Conditions Ease
Please click here for a chart of oil futures (CL_F).
Note the following:
- Oil is most sensitive to developments in the Middle East.
- The chart shows that oil is falling after an Iranian attack on Israel.
- The chart shows that oil is consolidating around the upper trendline.
- The best of all scenarios is playing out in the Middle East.
- Although there are contradictory reports, it is near certain that Iran informed Turkey and Turkey informed the U.S. of the Iranian attack in advance.
- The reason Iran informed the U.S. in advance is because Iran’s purpose was to show force and save face but not inflict much damage and for the U.S. to restrain Israel.
- The advance notice allowed the U.S. and Israel to shoot down 99% of about 300 drones and missiles, resulting in very little damage.
- Iran issued several statements that the operation was concluded.
- Biden is working hard to restrain Israel.
- Not only is oil down, stocks are being aggressively bought on the best Middle East scenario being played out.
- In The Arora Report analysis, Iran’s response to directly attack Israel has increased risks in the long term, especially without a robust response from Israel.
- Further, in The Arora Report analysis, Iran is buying time to build its nuclear capability.
- The momo crowd, being in a celebratory mood, is oblivious to several negative developments as outlined below:
- A market research firm with a good track record is projecting that Apple’s (AAPL) iPhone shipments fell about 10% in the last quarter. Apple shipped 50.1M iPhones according to this report. The consensus from Wall Street analysts is 51.7M iPhones. This is the worst drop in Apple iPhone shipments since the COVID lockdown.
- Those interested in next level information should consider listening to the just released two part series “MAXIMIZING RISK ADJUSTED RETURNS FROM AI IPHONE OPPORTUNITY.” For access to this series, please fill out the form below.
- Apple is long from $4.68 in the ZYX Buy Model Portfolio from The Arora Report. The prior Arora call has been to hedge the Apple position. The hedges are profitable. Stay tuned to the Real Time Feed for the plan on hedges and the potential change in the buy zone.
- Tesla (TSLA) is laying off 10% of its workforce. At the same time, Tesla is cutting the price for Full Self-Driving subscription to $99 from $199. In The Arora Report analysis, this is a brilliant move by Musk.
- New economic data shows good news for the economy but bad news for the momo crowd. After a brief hiatus, the U.S. consumer is back on a spending binge. Since the U.S. economy is 70% consumer based, prudent investors pay attention to retail sales. Here are the details:
- Headline retail sales came at 0.7% vs. 0.4% consensus.
- Retail sales ex-auto came at 1.1% vs. 0.5% consensus.
- In The Arora Report analysis, to control inflation, it is important that financial conditions do not become too loose. The root cause of financial conditions becoming too loose is Fed chair Powell. Due to the high importance of this matter, we are starting work on a podcast on this subject. Powell is trying his best to loosen financial conditions by jawboning at a time when the data clearly shows that Powell should be trying to tighten financial conditions. Conservative analysts are concluding that Powell is acting this way to help with Biden’s re-election. Trump has said that he will not reappoint Powell.
- If retail sales continue to be strong, it argues against cutting rates at all. In The Arora Report analysis, the data so far shows that even a rate hike should be on the table. None of this is good for the stock market. However, keep in mind that the stock market is controlled by the momo crowd, and the momo crowd does not do any deep analysis.
- 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.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), and Meta (META).
In the early trade, money flows are negative in AAPL, TSLA
In the early trade, money flows are positive in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).
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
The momo crowd is *** 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 *** in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) fell like a rock when the news of Iran’s attack on Israel broke. For prudent bitcoin investors, this busts the popular myth propagated by bitcoin whales to lure in retail investors that bitcoin is a hedge against geopolitics.
Those who are serious about making money in bitcoin may consider listening to the three part podcast series titled “WHALES’ SECRETS YOU NEED TO KNOW: CAPTURING BITCOIN PROFITS.” The podcast is available in Arora Ambassador Club.
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 weaker.
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 $2375, silver futures are at $28.85, and oil futures are at $85.15.
S&P 500 futures are trading at 5210 as of this writing. S&P 500 futures resistance levels are 5256, 5400, and 5500: support levels are 5020, 4918, and 4852.
DJIA futures are up 326 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 seven 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.
