By Nigam Arora
To gain an edge, this is what you need to know today.
Gold Blow-Off Top
Please click here for a chart of gold ETF (GLD).
Note the following:
- The chart shows the Arora signal to take partial profits on gold. The Arora Report has been bullish on gold from the cycle low near $1000. The Arora Report has been advocating 5% – 8% allocation to gold.
- The chart shows when the Arora blow-off top signal was first given. The Arora blow-off top signal was subsequently repeated.
- The chart shows that since the Arora blow-off top signal, gold has experienced the worst sell off in 12 years.
- Prior to the blow-off top, gold ETF (GLD) saw the highest option activity on record.
- A large portion of the buying in gold after it crossed $4000 is coming from the meme crowd. All of a sudden, a large number of meme gurus have appeared claiming to be experts in gold. In a sign of the times, the meme crowd is more than happy to wager its hard earned dollars on the advice of newly minted gold meme gurus.
- Long time members know The Arora Report has a long, unparalleled record of calling both strategic and tactical moves in gold and silver. Will the Arora algorithms be right again this time? Start with Arora’s Second Law of Investing and Trading, which states, “Nobody knows with certainty, what is going to happen next in the markets.” This time, there is a new element of extremely aggressive meme crowd call buying. This call buying created a gamma squeeze. For next level information on gamma squeezes, listen to the podcast in Arora Ambassador Club.
- At The Arora Report, we are now modeling this meme crowd behavior and incorporating it in our gold model.
- Investors need to differentiate between strategic and tactical signals. The Arora blow-off top signal was a tactical signal to take partial profits. The Trade Management Guidelines detail how to appropriately take partial profits. The strategic signal remains unchanged that the next target for gold is $6000 and gold has a path to $10K.
- Investors are eagerly awaiting inflation data tomorrow.
- So far, earnings this season are coming out better than the consensus but inline with whisper numbers. In the long run, earnings are the single best determinant of where the stock market goes. Among important earnings, Netflix (NFLX) earnings were disappointing. Investors are eagerly awaiting Tesla (TSLA) and IBM (IBM) earnings after the close. Tesla earnings will have a notable impact on the sentiment in the entire market.
- After the sentiment among the momo crowd being extremely positive for a long time, the momo crowd sentiment has swung to negative quickly in the matter of a couple of days. The reason is many momo accounts have been buying larger and larger quantities of call options in speculative stocks. In a matter of days, many such accounts are now decimated. As of this writing, the following illustrates the point:
- Space stock AST SpaceMobile (ASTS) stock has fallen 30.3% from its high.
- Nuclear stock Oklo (OKLO) is down 30.9% from its high.
- Data center stock IREN (IREN) has fallen 28.0% from its high.
- Quantum computing stock Rigetti (RGTI) is down 33.3% from its high.
- All investors should pay attention to sentiment, especially momo crowd sentiment.. The momo crowd sentiment has played a huge role in the rise of the stock market since the April Liberation Day low.
- Even though momo crowd sentiment has swung negative over the last couple of days, according to proprietary Arora Report indicators, overall sentiment remains in the extreme positive zone. It is worth repeating that the time to aggressively buy is when sentiment is extremely negative, and the time to hedge is when sentiment is extremely positive. Note that sentiment is not a precise timing tool. Extreme positive sentiment can sustain for months or longer. Prior to the 2000 dot com crash, extreme positive sentiment sustained for over two years.
- Sentiment among the meme crowd is exuberant this morning as they run up Beyond Meat (BYND), 1-800-Flowers.com (FLWS), and Krispy Kreme (DNUT) with their own extremely aggressive buying. Adding to the buying is a short squeeze.
- As an actionable item, the sum total of the foregoing is in the Arora Protection Band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the Arora Protection Band. The Arora Protection Band is one of the large number of unique edges that are available to members of The Arora Report.
Magnificent Seven Money Flows
Most portfolios are now heavily concentrated in the Mag 7 stocks. For this reason, to get ahead and get an edge, investors need to dig below the surface of the Mag 7 stocks. It is equally important to rise above the noise of daily news on the Mag 7 stocks. The best way to get an edge, dig below the surface, and rise above the noise of the daily news is to pay attention to early money flows in the Mag 7 stocks on a daily basis. When there is significant news in the Mag 7 stocks that rises above the threshold of noise and impacts your entire portfolio, it is covered in the main section above.
In the early trade, money flows are positive in Alphabet (GOOG) and Microsoft (MSFT).
In the early trade, money flows are neutral in Nvidia (NVDA) and Tesla (TSLA).
In the early trade, money flows are negative in Amazon (AMZN), Meta (META), and Apple (AAPL).
In the early trade, money flows are neutral in S&P 500 ETF (SPY) and negative in 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) in stocks in the early trade. Smart money is *** in the early trade.
Note for new members: Smart money often sells into the strength generated by momo crowd buying and buys into the weakness generated by momo crowd selling. Over a long period of time, investors come out ahead by adopting smart money’s ways. The exception is in a raging bull market – for very short term trades, consider following the momo crowd and not smart money. Smart money is an important indicator but is only one of hundreds of indicators that go into determining the Arora Protection Band and signals. Please click here and here to understand how signals are generated.
Very Very Short-Term Indicator
The Arora Report’s proprietary 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.
Gold
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
Buying is coming in in oil on the prospect of India reducing or stopping its purchase of Russian oil to get in President Trump’s good graces. India buys 38% of Russia’s oil.
API crude inventories came at a draw of 2.98M barrels vs. a consensus of a build of 3.524M barrels.
The momo crowd is *** oil in the early trade. Smart money is *** oil in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is range bound.
Markets
Interest rates and bonds are range bound.
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.
S&P 500 futures are trading at 6779 as of this writing. S&P 500 futures resistance levels are 6780, 7000, and 7200 : support levels are 6500, 6256, and 6131.
DJIA futures are up 25 points.
Gold futures are at $4051, silver futures are at $47.68, and oil futures are at $58.39.
Arora Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror. The proprietary Arora Protection Band from The Arora Report is very popular. The Arora 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 holding *** in cash, Treasury bills, short term fixed income, 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.
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.
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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.
