By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Deploy Cash And Reduce Hedges
Please see the Protection Band And What To Do Now section below.
This change is primarily triggered by a combination of powerful market mechanics and President Trump’s tariff shift. Keep in mind that this change may need to be quickly reversed if President Trump changes his mind.
Powerful Market Mechanics
Please click here for a chart of Apple stock (AAPL).
Note the following:
- Powerful market mechanics and the Trump tariff shift are in control of the stock market.
- The Morning Capsule is about the big picture, not an individual stock. The chart of AAPL is being used to illustrate the point.
- The chart shows a large move in AAPL stock in the closing minutes of the regular market session on Friday. The move up was due to large market on close orders. Large market on close orders, in turn, appear to be related to option expiration. Both market on close orders and option expiration are important market mechanics.
- This week, two powerful market mechanics are in control:
- Portfolio rebalancing
- Window dressing
- In The Arora Report analysis, quarter end rebalancing will bring in billions of dollars to buy stocks. In quarter end rebalancing, many money managers adjust the balance between stocks and bonds.
- In The Arora Report analysis, window dressing will also exert buying pressure on stocks. In window dressing, money managers buy winning stocks as well as popular stocks at the end of the quarter to show their clients in quarter end reports that they were holding winning and popular stocks.
- Next week, blind money will pour into the stock market. Blind money flows tend to be especially strong at the beginning of a quarter. Blind money is the money that flows into the stock market without any analysis and irrespective of market conditions.
- Deeply understanding market mechanics gives investors a big edge. Wall Street professionals keep important nuances close to the chest due to the very high value. The best way to learn about market mechanics, including important nuances, is to listen to podcasts in Arora Ambassador Club.
- President Trump has declared April 2 as Liberation Day. Trump appears to have shifted his strategy for Liberation Day. It now appears that Trump will not announce industry specific tariffs on April 2 – this is different from previous expectations. Most important are cars and chips – they may not see tariffs on April 2. Reciprocal tariffs are expected to be announced on April 2.
- As a heads up, in The Arora Report analysis, the U.S. systems for customs and the systems of private shippers are not ready to properly handle all of the complexities of new tariffs. Paradoxically, when the stock market discovers this, it may lead to more buying as investors will like the delays in tariff implementation.
- If the buying continues, those following traditional technical analysis will get a buy signal and jump in.
- In spite of the foregoing positives, the stock market is still overvalued and there are significant risks in the short term related to the current administration’s policies.
- Further, after the first two days of April, some selling may come in as many investors will sell stocks to raise cash to pay taxes.
- 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 Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and AAPL.
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 *** stocks 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 *** in oil in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is seeing buying along with tech stocks.
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 5787 as of this writing. S&P 500 futures resistance levels are 5926, 6017, and 6131: support levels are 5748, 5622, and 5500.
DJIA futures are up 412 points.
Gold futures are at $3030, silver futures are at $33.69, and oil futures are at $68.429.
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.
