By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Gold Hitting New High
Please click here for a chart of gold ETF (GLD).
Note the following:
- The chart of gold ETF is a monthly chart to give you a long term picture.
- The chart shows that gold has moved to a new high. As of this writing, April gold futures are trading at $3007.
- The chart shows several highly accurate Arora signals on gold.
- The chart also shows when an Arora call triggered a $200 global selloff in gold. Business Standard, which is like the Wall Street Journal of India, highlighted The Arora Report call.
- RSI on the chart shows that gold is overbought.
- As always, markets have crosscurrents. The positive in gold is it has broken above $3000. The negative is that gold is overbought and can pullback.
- In ZYX Allocation, there is a signal on a trade around position in GLD. In ZYX Buy, there are trade around position signals on silver ETF (SLV) and gold miner Newmont (NEM). The core positions in gold ETF GLD and silver ETF SLV are highly profitable.
- In the early trade, there is aggressive buying in the stock market on Democrats blinking and allowing the Senate to pass the Republican spending bill. The government shutdown appears to have been avoided.
- Buying is also coming in based on the results of AAII Sentiment Survey.
- AAII members are individual investors who tend to be older and not part of the momo crowd. Only 19.1% of AAII members are bullish. Historically, on the average 37.5% of these investors are bullish. 59.2% of these investors are bearish vs. a historical average of 31.0%.
- AAII members tend to be extremely pessimistic at market bottoms. They are a contrary indicator.
- Long time members of The Arora Report may recall that on March 9, 2009, The Arora Report issued a signal to back up the truck and buy stocks. The protection band was at 0%. With the benefit of hindsight, March 9, 2009 turned out to be the start of a long bull market. At that time, AAII members were extremely bearish.
- Prudent investors need to understand that the stock market has many groups of investors. It is important to take into account the groups that move the stock market. AAII members do not move the stock market.
- In our decades in the markets, we have learned that investors should not act on the AAII survey alone. A 360 degree analysis is a better approach for high risk adjusted returns.
- Prudent investors should rely on more comprehensive indications of sentiment such as The Arora Report’s proprietary sentiment indicator. Around the market top, we were sharing with you the sentiment was in the extreme positive zone. Now, on The Arora Report’s proprietary indicator sentiment has backed off from extreme positive to positive. Sentiment is a contrary indicator at extremes.
- The news from Germany and China is also boosting sentiment in the early trade. Please see the section below.
- University of Michigan consumer sentiment will be released today at 10am ET. This is very important data and may be market moving.
- 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.
Germany
Friedrich Merz, Germany’s Chancellor-In-Waiting, has reached an agreement with the Greens on a borrowing package to finance defense and infrastructure spending.
China
Chinese stocks surged on hopes of more government support. CSI 300 jumped 2.4%.
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 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.
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.
Also keep in mind, today is a Friday. There are two crosscurrents:
- Short sellers will be buying. If a short squeeze occurs, buying by short sellers can become aggressive.
- Institutions will try to lighten up on rallies ahead of the weekend, to reduce risk from not knowing what Trump will say over the weekend.
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 range bound.
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 5582 as of this writing. S&P 500 futures resistance levels are 5622, 5748, and 5926: support levels are 5500, 5400 and 5256.
DJIA futures are up 245 points.
Gold futures are at $3007, silver futures are at $34.70, and oil futures are at $67.19.
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.
