By Nigam Arora
To gain an edge, this is what you need to know today.
Gold Magnet
Please click here for a chart of gold ETF (GLD).
Note the following:
- The chart shows that the recent breakout above zone 2 (support) was successful.
- The chart shows that gold is now in zone 1 (resistance).
- Sentiment on gold is now extremely positive. Momo gurus with no prior record on gold are now jumping in pretending to be gold experts and urging their followers to aggressively buy gold. Historically, this is a common behavior of momo gurus. In 2011, after missing the gold rally, from $600 to $1800 momo gurus also jumped in pretending to be gold experts urging their followers to buy gold. Gold topped shortly afterwards.
- For traders, gold at $4000 has become a magnet. As a reference, gold futures are trading at $3681 as of this writing.
- The Arora Report gold ratings are followed by individual investors, hedge funds, bullion deals, and jewelers all across the globe. Members of The Arora Report can access The Arora Report’s gold ratings from the main menu of the Real Time Feeds. At times, The Arora Report calls have moved gold. As an example, here is a story by Business Standard, the Wall Street Journal of India, highlighting that an Arora call created ripples in the bullion market. Long time members of The Arora Report are long gold from close to $1000. Previously, The Arora Report call was to back up the truck and buy gold when it was around $600. When gold reached $1904 in 2011, The Arora Report call was to sell half of the gold position and put a stop on the other half at $1857. Gold topped at $1911 only hours after The Arora Report call was made and subsequently fell close to $1000.
- In The Arora Report analysis, there are two reasons for the latest buying in gold:
- Momo stock gurus have now discovered gold.
- Rate cut fever
- In The Arora Report analysis, a dichotomy has developed: 1) investors are buying gold believing inflation, deficit spending, and high debt are serious problems; 2) investors are buying stocks believing inflation, deficit spending, and high debt are not a problem.
- Yesterday we wrote:
Initial jobless claims came at 263K vs. 240K consensus. Initial jobless claims have not been this high since the fall of 2021.
- After the jobless claims data was released, euphoria broke out amongst stock market investors as they rejoiced in more people losing jobs. The reason is that as more people lose their jobs, the higher the pressure is on the Fed to cut interest rates. The momo crowd is addicted to low interest rates.
- When the jobless claims data was released, at the same time, Consumer Price Index (CPI) data was released. CPI data showed inflation was running hotter than expected and still around 3%, compared to the Fed’s target of 2%. In a rational world, the CPI data should have caused the stock market to drop significantly. However, the stock market is almost never rational. The stock market completely ignored inflation and latched on to the perceived good news (by the stock market) of more people losing jobs.
- The sentiment in the stock market is shifting from extreme positive to euphoria.
- Microsoft (MSFT) is rumored to take a $100B equity stake in ChatGPT creator OpenAI. Interestingly, OpenAI is also believed to have signed a $300B infrastructure contract with Oracle (ORCL) and not with Microsoft. In The Arora Report analysis, the stock market is perceiving this development as positive for both Microsoft and Oracle. Further, the stock market is perceiving this development as positive for the entire AI trade. This Microsoft investment answers, in part, the question as to where OpenAI will get the funds to pay Oracle.
- University of Michigan consumer sentiment will be released at 10am ET and may be market moving.
- 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
In the early trade, money flows are positive in Nvidia (NVDA), Microsoft (MSFT), and Tesla (TSLA).
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 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) 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 ***. 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.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is seeing buying.
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 6587 as of this writing. S&P 500 futures resistance levels are 6700 and 7000 : support levels are 6500, 6256, and 6131.
DJIA futures are down 81 points.
Gold futures are at $3681, silver futures are at $42.73, and oil futures are at $63.44.
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.
