By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
AI Progress
Please click here for a chart of semiconductor ETF (SMH).
Note the following:
- The Biden Administration is putting more restrictions on the export of chips and chip manufacturing equipment to China to further slow artificial intelligence development in China. A special target of the new restrictions is high bandwidth memory used in artificial intelligence.
- The chart shows that semiconductor ETF SMH is at the top band of the support zone.
- For most of this bull market, semiconductors have been the leading sector. Semiconductors are not only the lifeblood of the modern economy, they are the foundation required for artificial intelligence to work. Lately, semiconductors have been underperforming for the following reasons:
- The move up in semiconductors was way overdone. After a huge move is overdone, some consolidation and pullback is natural.
- This is the fourth round of restrictions on semiconductor exports to China. This is hurting semiconductor stocks.
- The next stage of AI is starting. In this stage, money is flowing out of semiconductors and into software stocks. There is a position in software EFT IGV in the ZYX Allocation Model Portfolios. AI software stock PLTR was recently added to the ZYX Buy Core Model Portfolio. Some software stocks will prosper with AI, but many will be decimated. For those wanting next level information, listen to the podcast titled “EXCITEMENT OVER AI AGENTS SHIFTS AI FRENZY FROM SEMIS TO SOFTWARE.”
- In major news, Pat Gelsinger is no longer the CEO of Intel (INTC). INTC stock is jumping up in the early trade. INTC is in ZYX Buy in the portfolio that surrounds the Core Model Portfolio.
- There are hedges on semiconductor positions in both ZYX Buy and ZYX Allocation. Consider adding to the hedges if the support zone shown on the chart is broken.
- In an important development, President-elect Trump is threatening BRICS countries with 100% tariffs if they attempt to move away from the dollar as the trading currency.
- In The Arora Report analysis, Trump’s worry is justified. The U.S. owes part of its prosperity to the dollar’s status not only as the reserve currency but also as the main trading currency in the world.
- BRICS countries are important because 45% of the world’s population lives in the nine BRICS countries. The original BRICS countries are Brazil, Russia, India, China, and South Africa. Now, BRICS is expanding and currently includes Egypt, Ethiopia, Iran, and U.A.E.
- BRICS countries have been working hard to move away from the dollar.
- In The Arora Report analysis, there is dissonance on Trump’s part. BRICS will use this dissonance to further move away from the dollar. The dissonance is that on one hand Trump wants BRICS countries to not move away from the dollar, but at the same time, Trump is moving the U.S. deeper into bitcoin. Taking a cue from Trump, why would BRICS not also move towards bitcoin and other alternate currencies and away from the dollar?
- The foregoing has major implications for investors. As such, investors need to keep a close watch to see if Trump recognizes the dissonance and backs away from bitcoin.
- In the early trade, the momo crowd is aggressively buying the same high momentum stocks they were buying last week.
- 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.
Blind Money
Today is the first day of the month. On the first two days of the month, blind money flows into the stock market. Blind money is the money that is invested without any analysis, irrespective of market conditions.
France
In France, the far right is threatening to topple the government over the budget. This is causing the dollar to move higher against the euro.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Alphabet (GOOG), Meta (META), and Tesla (TSLA).
In the early trade, money flows are neutral in Apple (AAPL), Microsoft (MSFT), and Nvidia (NVDA).
In the early trade, money flows are neutral 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.
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.
Very Very Short-Term Indicator
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.
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
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 (BTC.USD) is range bound.
Markets
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.
S&P 500 futures are trading at 6051 as of this writing. S&P 500 futures resistance levels are 6131 and 6256: support levels are 6017, 5926, and 5748.
DJIA futures are down 36 points.
Gold futures are at $2668, silver futures are at $31.06, and oil futures are at $69.04.
Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror. The proprietary protection band from The Arora Report is very popular. The 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.
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.
