By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Added Geopolitical Risk
Please click here for a chart of France ETF (EWQ).
Note the following:
- The chart shows French stocks made a lower high.
- The chart shows French stocks are making a topping formation. This is a negative.
- Investors already face significant geopolitical risks emanating from Ukraine, Taiwan, Korea, and the Middle East. Now there is an additional risk – far right parties may win a record number of seats in the European Parliament.
- According to the exit polls, far right parties will win 150 of 720 seats.
- Centrists are still likely to win the largest number of seats, but both the far left and far right are gaining seats.
- Of note is that the biggest far right gains are coming from three important countries: France, Italy, and Germany.
- In France, President Emmanuel Macron dissolved parliament and called a snap election. Marine Le Pen’s far right National Rally won 36.8% of the vote compared to Macron’s party winning 14.6% of the vote.
- In Germany, Chancellor Olaf Scholz’s Social Democrats won only 14% of the vote.
- In The Arora Report analysis, it is likely that voters who voted for the far right parties in the European election may end up voting for centrist parties in national elections.
- In The Arora Report analysis, investors should also note that the pro-environment Green parties suffered heavy losses in the election. It appears that voters in Europe are tired of the heavy cost of ambitious climate policies. This has a negative impact on electric vehicle stocks and renewable energy stocks.
- The election results from Europe are dampening the sentiment across the globe. On the positive side, three developments are helping the stock market.
- There was a significant pump over the weekend about AI stocks. Retail investors tend to respond to the weekend pump.
- Retail investors are excited about Nvidia (NVDA) trading post split at about $120.
- Apple (AAPL) will unveil its AI strategy today at WWDC.
- 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 AAPL and Microsoft (MSFT).
In the early trade, money flows are neutral in Amazon (AMZN), Alphabet (GOOG), and Meta (META).
In the early trade, money flows are negative in NVDA and Tesla (TSLA).
In the early trade, money flows are negative 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 *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is trading below $70,000.
Markets
Our very, very short-term early stock market indicator is *** but can easily change based on the reaction to Apple announcements at WWDC and price action in NVDA stock post split. 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 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.
Gold futures are at $2322, silver futures are at $29.85, and oil futures are at $76.09.
S&P 500 futures are trading at 5345 as of this writing. S&P 500 futures resistance levels are 5400, 5500, and 5622: support levels are 5256, 5210, and 5020.
DJIA futures are down 67 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 seven 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.
