By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Bitcoin Jubilation
Please click here for a chart of bitcoin (BTC.USD).
Note the following:
- The chart shows the Arora buy signal when bitcoin broke out above the support zone. As of this writing, there is a 39% gain since the buy signal.
- The chart shows the run up in bitcoin since Trump’s re-election.
- The chart shows bitcoin has broken out above $100K. There is jubilation. Buying is very aggressive as of this writing.
- Bitcoin bulls are tripping over themselves to come up with higher and higher targets for bitcoin.
- The reason for the breakout in bitcoin is that Trump has appointed a crypto lobbyist to head the SEC. To crypto bulls, this appointment means bitcoin is going to go higher than their prior projections. Bitcoin critics are dismayed because they see Trump appointing a fox to guard the hen house.
- In the entire history of the SEC, the SEC’s function has been to regulate the markets and not promote one asset over another. It is yet to be seen what the SEC will do under new leadership, but the entire incoming government is dedicated to promoting not only bitcoin but all cryptos. Trump says that he wants the U.S. to be the leader in cryptos. The reason is that critics say Trump has a personal interest in the crypto business. About two thirds of Trump’s wealth comes from DJT. DJT is also looking at entering the crypto business. In addition, Trump has a separate crypto business.
- The American public clearly supports cryptos. In the last election, 298 Senators and Representatives who are pro-crypto were elected. It is generally believed that almost all of them own crypto. It is also generally believed that most Trump appointees own crypto.
- Critics also find it ironic that bitcoin was invented as a payment system that would be free of government influence. For years, bitcoin promoters touted bitcoin as a tool to be free from government and Wall Street. In an ironic twist, now crypto is running up because the government is going to heavily promote crypto and use federal resources to run up bitcoin.
- Irrespective of how you feel about bitcoin, money is to be made in bitcoin. For those serious about making money from bitcoin, listen to the podcast titled “OUT OF THIS WORLD BITCOIN PLAN EMERGES.”
- In The Arora Report analysis, bitcoin has now become the tail that wags the stock market. Prudent investors should ask themselves two questions: Is this healthy for the stock market, and how important is it to control risk in this environment?
- Yesterday morning, we shared that the stock market was front running Powell with hopium that Powell would be dovish and say that he would cut interest rates even though the data did not support such rate cuts.
- In a surprise to the market, Powell was hawkish, acknowledged that data was strong, and said that the data gave the Fed more flexibility. Powell indicated that he was not in a hurry to cut rates.
- If the sentiment was not so extreme, the stock market would not only have given up its gains, it would have fallen significantly on Powell’s comments. However, the market did exactly what it does when sentiment is extreme. The market continued to levitate.
- Initial jobless claims came at 224K vs. 213K consensus. In The Arora Report analysis, the change is not meaningful.
- The jobs report will be released tomorrow at 8:30am ET and may be market moving.
- 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.
France
In France, the far left and far right teamed up to topple the centrist government. French stocks are up on the assumption that ultimately, there will be more austerity. Both the far left and far right disagreed with the budget that controlled spending.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Alphabet (GOOG), and Tesla (TSLA).
In the early trade, money flows are neutral in Apple (AAPL), Nvidia (NVDA), Microsoft (MSFT), and Meta (META).
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 continues to see aggressive buying above $100K.
Markets
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.
S&P 500 futures are trading at 6096 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 35 points.
Gold futures are at $2669, silver futures are at $31.81, and oil futures are at $68.69.
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.
