By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
The Message For Prudent Investors
Please click here for a chart of gold ETF (GLD).
Note the following:
- The chart shows that gold has broken out to an all time high.
- The chart shows higher volume. This indicates conviction in the breakout.
- RSI shown on the chart is at an all time high. This indicates there is high momentum behind the breakout. Breakouts that happen with RSI at all time high tend to lead to big moves in the longer term. However, when RSI is this overbought, it often leads to a short term pullback.
- In The Arora Report analysis, there is an important message here for prudent investors:
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- Stock market sees clear skies as far as the eye can see.
- Bitcoin (BTC.USD) is near all time high indicating that the speculative juices are running at all time high.
- Nvidia (NVDA) is at an all time high and goes up every day indicating that many investors believe artificial intelligence is going to trump everything else.
- YOLO (you only live once) is taking over in penny stocks, junk stocks, highly speculative tech stocks, as well as highly speculative biotech stocks indicating the breath of extremely positive sentiment.
- Gold is bought when investors want to hedge their portfolios, when investors see trouble ahead, and when investors want to be defensive.
- Who is buying gold at a time when the sentiment is at extreme high? The answer is prudent investors who have studied the history of the markets and know that when sentiment gets this high, it is time to buy protection.
- Historically when sentiment gets this high, something comes out of the blue that nobody has foreseen to drive the stock market lower.
- For those who want deeper knowledge on investing in gold, the easiest way to learn is from the podcasts in the Arora Ambassador Club. If you would like to be on the waitlist, please click here to fill out the form.
- Initial jobless claims came at 217K vs 217K consensus. This indicates that the jobs picture is very strong, especially at the low end. Jobs picture is weak in IT and is likely to get weaker in areas that are being impacted by AI.
- Unit Labor Costs – Rev. came at 0.4% vs 0.6% consensus. This indicates that costs are not rising as fast in manufacturing.
- Productivity – Rev. came at 3.2% vs 3.1% consensus. Higher productivity drives the stock market higher.
- Powell will be repeating his testimony in front of the Congress. Expect momo gurus to twist his testimony to run the stock market higher.
- Jobs Report, mother of all reports, will be released at 8:30am ET tomorrow. As is their pattern, momo crowd is buying ahead of the Jobs Report on hopium.
- 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.
Europe
European Central Bank (ECB) left interest rates unchanged as expected.
Japan
Speculation is building that Japan will raise interest rates in March. If this occurs, this will be the first interest rate hike since 2007.
As we have written before in detail, Bank of Japan (BOJ) policies will have a major impact on the stock market in the US.
Two Japan related ETFs are in ZYX Allocation Core Model Portfolio.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), NVDA, Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Apple (AAPL).
In the early trade, money flows are negative in Tesla (TSLA).
In the early trade, money flows are positive in S&P 500 ETF (SPY) and in 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) in the early trade. Smart money is *** in the early trade.
Gold
The momo crowd is *** 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 range bound. Bitcoin whales are pushing the narrative of bitcoin going to $80K over the weekend. Bitcoin is trading at $67,027 as of this writing.
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 $2167, silver futures are at $24.49, and oil futures are at $78.76.
S&P 500 futures are trading at 5132 as of this writing. S&P 500 futures resistance levels are 5210, 5400, and 5500: support levels are 5020, 4918, and 4852.
DJIA futures are up 106 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.
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.
