By Nigam Arora & Dr. Natasha Arora
Gold Outshines
Please click here for a chart comparing Nasdaq 100 ETF (QQQ), S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX), bitcoin ETF (IBIT), and gold ETF (GLD).
Note the following:
- The chart shows that for this volatile period since the peak in tech stocks, gold has outperformed as follows:
- Gold has outperformed SPY by 15.02%.
- Gold has outperformed QQQ, which represents tech stocks, by 18.13%.
- Gold has outperformed bitcoin ETF (IBIT) by 19.93%.
- Gold ETF (GLD) is in the ZYX Allocation Model Portfolio. In the Core Model Portfolio, allocation to GLD has been 5% – 8%. In the Lower Exposure Model Portfolio, the allocation to GLD has been 4% – 6%. In addition, there is also a GLD trade around position in ZYX Allocation. Further, The Arora Report’s gold ratings along with gold allocation is popular among investors, hedge funds, jewelers, and bullion dealers across the globe – the allocation to precious metals has been 5% – 8% of the portfolio. The gold ratings and allocation can be accessed from the main menu of the Real Time Feed.
- As a reference, allocation to bitcoin ETF (IBIT) has been 0% – 2% in ZYX Allocation Core Model Portfolio and 0% in the Lower Exposure Model Portfolio. Further, partial profits have been taken three times on IBIT, leaving only a very small position in the Model Portfolio.
- For the period shown on the chart, bitcoin volatility is about 300% that of gold. Prudent investors focus on risk adjusted returns. Risk adjusted returns on bitcoin must be significantly higher than gold to match the return in gold.
- The chart is also very instructive in that Wall Street’s consensus at the beginning of the chart period was the total opposite of what has happened.
- President Trump is scheduled to make a tariff announcement today at 4pm ET.
- A battle royale has been raging between stock market bulls and bears ahead of President Trump’s announcement. Yesterday, stock market bulls got the upper hand, aided by blind money. In the early trade this morning, stock market bears have the upper hand. It is worth repeating what we shared with you yesterday:
- There are divergent opinions on how the stock market will behave after Trump reveals his tariff plan on Liberation Day.
- Permabulls are expecting a rip-roaring rally and urging their followers to aggressively buy stocks.
- Permabears are expecting a big market drop.
- In The Arora Report analysis, prudent investors should ignore both the permabulls and the permabears.
- In The Arora Report analysis, how the market behaves after Trump’s reveal will come down to the difference between expectations about tariffs that are built into the market and what Trump reveals.
- If the tariffs Trump reveals are less onerous than market expectations, the stock market will go up.
- If the tariffs Trump reveals are more onerous than market expectations, the stock market will go down.
- The latest ISM manufacturing data shows stagflation – growth is slowing and prices are rising. ISM Manufacturing Index came at 49.0% vs. 49.8% consensus. More importantly, Prices Paid Index came at 69.4 vs. 64 consensus. As a reference, the index was at 62.4 in February. Investors need to take time now to learn about stagflation as stagflation is a scrooge that can drain your portfolio. To help investors learn, membership in Arora Ambassador Club has been opened up. Today is the last day membership is open. If you are interested, please write to ambassador@TheAroraReport.com.
- ADP is the largest private payroll processor in the country. ADP uses its data to provide a glimpse of the official jobs report, the mother of all reports, that will be released on Friday at 8:30am ET. The just released ADP employment change came at 155K vs. 120K consensus. This indicates that the jobs picture remains strong.
- As we have shared with you before, prudent investors need to be aware that jobs data can deteriorate very quickly. It is important to stay alert. Prudent investors should also keep in mind that ADP data does not include government employees.
- Tesla (TSLA) delivery data impacts stock market sentiment. For this reason, prudent investors should pay attention to Tesla delivery data. Tesla produced over 362K vehicles vs. over 412K consensus and delivered over 336K vehicles vs. over 378K consensus and whisper numbers of around 360K. As of this writing in the premarket, these numbers are negatively impacting stock market sentiment.
- 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 negative in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).
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.
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.
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
API crude inventories came at a build of 6.037M barrels.
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 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 5620 as of this writing. S&P 500 futures resistance levels are 5748, 5926, and 6017: support levels are 5500, 5400, and 5256.
DJIA futures are down 290 points.
Gold futures are at $3162, silver futures are at $34.62, and oil futures are at $70.97.
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.
