By Nigam Arora
To gain an edge, this is what you need to know today.
Deploy Cash And Reduce Hedges
The remaining hedges are still very profitable. Consider taking additional profits on hedges, especially on any pullback. Consider deploying cash, especially on a pullback.
Please see the Arora Protection Band And What To Do Now section below for details.
Market At Resistance Zone
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- The chart shows the stock market has staged a spectacular rally on the news of a ceasefire with Iran.
- The chart shows that the stock market is now at the bottom band of zone 1 (resistance).
- Of special note is that as the chart shows, during the Iran war, the stock market touched the low band of zone 2 (support); it did not break down through the low band and bounce. This is more remarkable when you consider the Arora support zone was given well in advance and was very different from any other support level that major Wall Street banks were providing – none of Wall Street’s support levels held. This demonstrates the power of Arora zones. Arora zones have nearly a two decade record of accuracy.
- RSI on the chart shows the stock market has room to go higher.
- Here is the key question for investors: Will the stock market get stuck in zone 1 in the near term, or will it break out to the magnet first and then go higher? Consider not following gurus who claim to know for sure what is going to happen next. Start with Arora’s Second Law of Investing and Trading, “Nobody knows with certainty what is going to happen next in the markets.” What happens next will come down to the following:
- The ceasefire is fragile. The statements from Iran and the U.S. as to what has been agreed upon are remarkably different. Will Iran and the U.S. reach a final agreement? It will come down to how much President Trump wants to overlook to declare victory.
- The probability of hostilities resuming again is low but not zero.
- Despite all the damage Iran has sustained, Iran is in a strategically stronger position now than it was before the war started, provided the current regime does not collapse because of infighting. If the current regime does not collapse, in the long term, this war is negative for the U.S. However, if the current regime collapses, the long term will be very positive for the U.S.
- Important inflation data is ahead. If inflation is hot, expect Wall Street to dismiss it with claims that the hot inflation was due to the war.
- Earnings season is ahead. Corporations have been raising prices. As such, expect earnings to be good. In those cases where earnings are not good, expect Wall Street to rationalize that it is the result of war and issue buy signals.
- FOMC minutes will be released today at 2pm ET.
- PCE, the Fed’s favorite inflation gauge, as well as personal income and spending, initial jobless claims, and GDP will be released tomorrow at 8:30am ET.
- Consumer Price Index (CPI) will be released Friday at 8:30am ET, followed by University of Michigan Consumer Sentiment at 10am ET.
- As an actionable item, the sum total of the foregoing is in the Arora Protection Band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the Arora Protection Band. The Arora Protection Band is one of the large number of unique edges that are available to members of The Arora Report.
Magnificent Seven Money Flows
Most portfolios are now heavily concentrated in the Mag 7 stocks. For this reason, to get ahead and get an edge, investors need to dig below the surface of the Mag 7 stocks. It is equally important to rise above the noise of daily news on the Mag 7 stocks. The best way to get an edge, dig below the surface, and rise above the noise of the daily news is to pay attention to early money flows in the Mag 7 stocks on a daily basis. When there is significant news in the Mag 7 stocks that rises above the threshold of noise and impacts your entire portfolio, it is covered in the main section above.
In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (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) buying 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. Smart money is an important indicator but is only one of hundreds of indicators that go into determining the Arora Protection Band and signals. Please click here and here to understand how signals are generated.
Very Very Short-Term Indicator
The Arora Report’s proprietary very, very short-term early stock market indicator is *** due to extremely aggressive buying, which historically leads to a pullback. However, due to the Iran development, there is uncertainty as to what is going to happen. 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 extremely aggressively *** gold in the early trade. This is reflected in gold ETF (GLD), silver ETF (SLV), gold miner ETF (GDX), and silver miner ETF (SIL). Smart money is *** in the early trade.
For longer-term, please see gold and silver ratings.
Oil
API crude inventories came at a build of 3.719M barrels vs. 10.263M barrels previously.
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 seeing buying.
Markets
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.
S&P 500 futures are trading at 6832 as of this writing. S&P 500 futures resistance levels are 7000, 7200, and 7500 : support levels are 6780, 6600, and 6481.
DJIA futures are up 1238 points.
Gold futures are at $4819, silver futures are at $77.41, and oil futures are at $93.42.
Arora Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror. The proprietary Arora Protection Band from The Arora Report is very popular. The Arora 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.
