By Nigam Arora
To gain an edge, this is what you need to know today.
Dip In Support Zone And Bounce
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- The chart shows that this morning the stock market dipped deeper into the Arora Support Zone (zone 1).
- The chart shows a huge bounce from the lows on President Trump’s pivot as explained below.
- On Saturday evening, President Trump had given a 48 hour ultimatum for Iran to open the Strait of Hormuz or the U.S. would bomb Iran’s power plants.
- Iran responded by saying if its power plants were to be bombed, then Iran would close the Strait of Hormuz by mining it and attack the energy infrastructure and water desalination plants of U.S. allies.
- Last night in Asia and earlier in the U.S., margin calls were hitting. Pressure from margin calls were especially severe in gold and silver. There was also heavy selling in gold and silver from the Middle East, Iran, India, and China. For those seeking next level information, one of the most important podcasts titled “GOLD & IRAN WAR: THE CRITICAL EDGE AAC MEMBERS HAD WHILE GREAT ANALYSTS GOT TRAPPED“ has just gone live in Arora Ambassador Club. The reason the podcast is one of the most important is that it uses the move in gold to illustrate how to think better than great analysts. Leading up to the Iran war, great analysts were issuing buy calls on gold and silver at a time when The Arora Report was giving signals to take partial profits on gold, silver, and precious metal miners. When the Iran war broke out, great analysts doubled down on their calls to buy gold and silver, but The Arora Report did not issue any buy calls. The podcast explains the contrarian analysis that has now proven spot on. The accuracy of The Arora Report analysis is evident from the moves in gold and silver:
- Gold dipped from above $5600 to as low as $4100 this morning.
- Silver dipped from above $120 to as low as $61.21 this morning.
- This morning, President Trump decided to postpone bombing Iran’s power plants for five days. President Trump’s action has created an extreme whipsaw in the markets. To fully grasp the whipsaw, take a close look at the ranges so far today:
- S&P 500 futures traded as low as 6483 and as high as 6748.
- Oil futures traded as low as $84.37 and as high as $101.67.
- Gold futures traded as low as $4100 and as high as $4537.
- Silver futures traded as low as $61.21 and as high as $69.98.
- Bond futures traded as low as 111’25 and as high as 113’14.
- Even though there is extreme bullishness in the stock market as of this writing and in The Arora Report analysis the bullishness is justified, prudent investors need to be aware that war is full of deception. Here are the two scenarios to consider:
- President Trump is postponing the bombing so that there is enough time to position Marines to take over Kharg Island. If President Trump were to order the bombing of Iran’s power plants today, U.S. forces are not positioned to handle Iran’s counter offensive.
- Iran is agreeing to talks so that it has more time to mine the Strait of Hormuz.
- As of this writing, President Trump is saying, “Iran wants to make a deal badly, could be within 5 days or sooner.”
- If there is a deal with Iran, expect a rip-roaring rally in the stock market, gold, silver, and bonds and a drop in oil. If there is no deal, the U.S. takes over Kharg Island, and Iran mines the Strait of Hormuz, expect the reverse.
- The Arora Report has given several actionable, tactical signals, including signals on gold, silver, and various stocks that are in keeping with the situation.
- As far as the Arora Protection Band is concerned, remember The Arora Report principle: give precedence to the return of capital over the return on capital. Most investors may consider not making any changes to their protection band at this time until there is more clarity. Those who are aggressive may consider reducing the protection band by 3% – 5% but staying within the Arora Protection Band given below.
- 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
Most portfolios are now heavily concentrated in the Mag 7 stocks. For this reason, to get ahead and get an edge, investors need to dig below the surface of the Mag 7 stocks. It is equally important to rise above the noise of daily news on the Mag 7 stocks. The best way to get an edge, dig below the surface, and rise above the noise of the daily news is to pay attention to early money flows in the Mag 7 stocks on a daily basis. When there is significant news in the Mag 7 stocks that rises above the threshold of noise and impacts your entire portfolio, it is covered in the main section above.
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 extremely 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) buying stocks in the early trade. Smart money is *** stocks 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. This is reflected in gold ETF (GLD), silver ETF (SLV), gold miner ETF (GDX), and silver miner ETF (SIL). Smart money is *** gold 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 *** oil in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is seeing buying.
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 6692 as of this writing. S&P 500 futures resistance levels are 6780, 7000, and 7200 : support levels are 6600, 6481, and 6322.
DJIA futures are up 1025 points.
Gold futures are at $4463, silver futures are at $69.49, and oil futures are at $89.15.
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.
