BOND RALLY DRIVES STOCKS, TAIWAN SEMI SHOWS AI DEMAND, MANIPULATORS HAVING A HEYDAY WITH QUANTUM

Twitter
LinkedIn
Facebook

By Nigam Arora & Dr. Natasha Arora

To gain an edge, this is what you need to know today.

Bonds Are The Leading Indicator

Please click here for a chart of 20+ year Treasury bond ETF (TLT).

Note the following:

  • On January 10th, we wrote in the Morning Capsule:

Bonds are now very oversold.  For this reason, bonds may see a technical bounce.  The bounce in bonds means yields pulling back.  If yields pull back, the stock market will rally.

  • The chart shows that bond ETF TLT previously touched the top band of the support zone.
  • The chart shows that bonds rallied on cooler core CPI.
  • The chart shows that bonds are now close to the bottom band of the lower resistance zone.
  • RSI on the chart shows that bonds were very oversold prior to the rally.
  • There was aggressive buying in the stock market yesterday, primarily on the rally in bonds.  The Arora Report call from January 10th has proven spot on.
  • The outsized rally yesterday was exaggerated for two reasons:
    • Positioning of Wall Street.  Positioning is a very important market mechanic.  Understanding positioning gives you an edge.  The easiest way to learn about positioning is to listen to the podcast “MARKET MECHANICS: POSITIONING.”
    • A vicious short squeeze occurred as many funds were positioned for a drop in the stock market.
  • Here is another indication of extreme positive sentiment.  The market focused on 0.1% cooler core CPI but totally ignored the headline CPI that was hotter.  The headline CPI includes food and energy.  Prudent investors should note that people are still eating food and putting gas in their cars.  Gas prices are going up.  Is inflation really tamed as the stock market believed yesterday?  Looking forward, insurance costs for consumers are also going to go up after the Los Angeles fires.  The rise in insurance costs will not be limited to Los Angeles but will be felt across the country.
  • Taiwan Semiconductor (TSM) is the largest semiconductor manufacturer in the world. Taiwan Semiconductor is the manufacturer of semiconductors for Apple (AAPL) and Nvidia (NVDA). Taiwan Semiconductor reported blowout earnings on continued AI demand.  This is bringing more enthusiasm to AI stocks.
  • The meme crowd is rushing headlong into quantum computing stocks such as IONQ Inc (IONQ), Quantum Computing Inc (QUBT), D-Wave Quantum Inc (QBTS), Rigetti Computing Inc (RGTI), SEALSQ Corp (LAES), and Arqit Quantum Inc (ARQQ).  The trigger is Microsoft (MSFT) declaring 2025 the year to be quantum ready.  Microsoft has announced a new Quantum-Ready program.  Manipulators are having a heyday taking advantage of the meme crowd, just like manipulators did with earlier meme crowd favorites like AMC and GME.  In GME and AMC, the meme crowd lost their shirts, but manipulators made money like bandits.  Clearly, the meme crowd has not learned their lesson from the prior major losses.
  • In The Arora Report analysis, quantum computing has significant potential to make money, but it has to be done carefully and patiently.  Under the present situation of quantum stocks becoming totally divorced from reality, the best course of action for investors is to be patient.  It is a grave mistake to emulate meme crowd behavior and become prey of the manipulators.
  • Prudent investors pay attention to retail sales because the US economy is 70% consumer based.  Retail sales data is slightly weaker than expected:
    • Retail sales came in at 0.4% vs 0.5% consensus.
    • Retail sales ex Auto came in at 0.4% vs 0.5% consensus.
  • Weekly initial jobless claims are creeping up.  Claims came at 217K vs 212K consensus. 
  • 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.
See also  WEEKLY STOCK MARKET DIGEST: WHAT PRUDENT INVESTORS NEED TO KNOW NOW

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), NVDA, Microsoft (MSFT), and AAPL.

In the early trade, money flows are neutral in Tesla (TSLA).

In the early trade, money flows are negative in Alphabet (GOOG) and Meta (META).

In the early trade, money flows are neutral in S&P 500 ETF (SPY) and positive 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) 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.

See also  WEEKLY STOCK MARKET DIGEST: WHAT PRUDENT INVESTORS NEED TO KNOW NOW

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) is rangebound trading just below 100,000.

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 5995 as of this writing.  S&P 500 futures resistance levels are 6017, 6131, and 6256: support levels are 5926, 5748, and 5622.

DJIA futures are down 133 points.

Gold futures are at $2744, silver futures are at $31.90, and oil futures are at $78.42.

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.

See also  TRUMP FOCUSED ON 10-YEAR YIELD AND NOT THE FED, SLOWER AI GROWTH FEARS ON ARM EARNINGS

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.

To take a free 30-day trial to paid services to gain access to more opportunities, please click here.

This post was just published on ZYX Buy Change Alert.

Markets can generate substantial wealth for knowledgeable investors. NOW YOU TOO CAN ALSO SPECTACULARLY SUCCEED AT MEETING YOUR GOALS WITH THE HELP OF THE ARORA REPORT. You are receiving less than 2% of the content from our paid services. …TO RECEIVE REMAINING 98% INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES, TAKE A FREE
TRIAL TO PAID SERVICES.

Please click here to take advantage of a FREE 30 day trial.

Picture of Nigam Arora

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.

Picture of Dr. Natasha Arora

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.

Subscribe to 'Generate Wealth'

Free Forever

More To Explore

30 Day Free Trial

Cancel within 30 days and you owe nothing

When you take a FREE 30 day trial, you get access to powerful techniques used by billionaires and hedge funds to grow richer. You can continue to use these powerful techniques to grow richer even if you cancel your subscription. You come out ahead by subscribing no matter how you look at it.

AI is power hungry. Investors will make a fortune from nuclear power for AI.
Get the list of 12 nuclear power stocks to grab your share of the profits.

AI is power hungry. Investors will make a fortune from nuclear power for AI.

Get the list of 12 nuclear power stocks to grab your share of the profits.

Big Tech is investing billions

Making A Fortune
In Nuclear Energy

Golden Age of Nuclear Energy

Skip to content