By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Defense Stocks Winning
Please click here for a chart of RTX stock (RTX).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of RTX stock is being used to illustrate the point.
- The market is reaching a consensus that defense stocks are winners irrespective of Trump or Harris winning the election. The consensus is that defense spending is going to go up irrespective of who wins.
- RTX is an aerospace and defense stock. RTX makes the Patriot anti-missile defense system.
- The chart shows that RTX stock has broken out after reporting earnings better than the consensus.
- The chart shows Arora buy zones giving members of The Arora Report opportunities to buy RTX at great prices.
- There is an RTX position in the Core Model Portfolio in ZYX Buy. There is also a trade around position on RTX. Trade around positions are a billionaire and hedge fund technique used to maximize risk adjusted returns. See the Trade Management Guidelines for more on trade around positions
- The chart shows that a signal was given to take partial profits on the trade around position to take advantage of the strength.
- A new buy zone and Buy Now rating on RTX will be published for investors who do not own the stock.
- RSI on the chart shows that RTX is overbought in the very short term.
- Other defense stocks such as Lockheed Martin (LMT) and L3Harris Technologies (LHX) are also reporting earnings better than the consensus. Technically, LMT has broken out. A signal may be given on LMT if it pulls back.
- For those interested in ETFs, aerospace and defense ETF (ITA) is also attempting a breakout. ITA is in the ZYX Allocation Model Portfolio.
- In The Arora Report analysis, all investors should consider some allocation to the defense and aerospace sector.
- The battle around tech stocks, especially AI stocks, continues. Many investors are selling AI stocks and rotating into small cap stocks; other investors are taking advantage of the dip in AI stocks and aggressively buying. Prudent investors should consider using The Arora Report’s buy zones and Buy Now ratings.
- Small cap ETF (IWM), as well as micro cap closed end fund (RMT), are in the ZYX Allocation Model Portfolio.
- In The Arora Report analysis, Trump is good for small caps but Harris is not. For those interested in next level information on the impact of the election on various sectors, please write us at Ambassador@TheAroraReport.com.
- PCE is the Fed’s favorite inflation gauge. The just released data came as expected. Here are the details:
- PCE came at 0.1% vs. 0.1% consensus.
- Core PCE came at 0.2% vs. 0.2% consensus.
- The U.S. economy is 70% consumer based. For this reason, prudent investors pay attention to personal income and personal spending. The consumer continues to spend but income may be becoming a problem. Here are the details of the new personal income and spending data:
- Personal income came at 0.2% vs. 0.4% consensus.
- Personal spending came at 0.3% vs. 0.3% consensus.
- In the early trade, the market is volatile on the momo crowd aggressively buying tech stocks, especially AI stocks. However, the up spikes are being met with selling.
- 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.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Apple (AAPL), Amazon (AMZN), Meta (META), Nvidia (NVDA), and Tesla (TSLA).
In the early trade, money flows are neutral in Microsoft (MSFT).
In the early trade, money flows are negative in Alphabet (GOOG).
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.
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.
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 *** oil in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is seeing aggressive buying on expectations that Trump will announce a U.S. strategic reserve for bitcoin. Trump will deliver the keynote speech at a bitcoin conference on Saturday.
We previously shared with you that Trump has apparently invited investors to a private bitcoin related fundraiser where the admission fee for bitcoin investors is $845,000 per person. Trump has already raised more than $4M in cryptocurrencies.
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 down, and bonds are ticking up.
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 $2376, silver futures are at $28.05, and oil futures are at $77.63.
S&P 500 futures are trading at 5479 as of this writing. S&P 500 futures resistance levels are 5500, 5622, and 5748: support levels are 5400, 5256, and 5210.
DJIA futures are up 234 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.
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.
