By Nigam Arora
To gain an edge, this is what you need to know today.
Buying On Hopium
Please click here for a chart of leveraged semiconductor ETF (SOXL).
Note the following:
- Semiconductors reflect the AI trade, and SOXL is the momo crowd’s favorite.
- The chart shows SOXL bounced above the top band of zone 3 (support) on Friday due to triple witching buying. Friday also saw aggressive call buying in several semiconductor stocks including Sandisk (SNDK) and Micron (MU).
- The chart shows SOXL is jumping again in the early trade on very aggressive buying.
- There is very aggressive buying in the stock market this morning, especially in the AI trade. There are five main factors:
- Hopium about Iran
- Hoping about China
- Bitcoin jumping above $85K
- Greenland deal
- Anthropic IPO
- President Trump is likely to meet Gulf leaders in New York this week. The stock market is assuming that the talks will lead to a resolution of the Iran war. Prudent investors should note that Iran is not part of these talks. Iran has laid out its demands to end the war, and the U.S. is unlikely to accept Iran’s demands.
- We previously shared with you that a Houthi attack had shut down the East-West Pipeline in Saudi Arabia. Saudi Arabia had been using the pipeline to bypass the Strait of Hormuz to send oil from its eastern fields to the Red Sea. This morning, there is hopium that Saudi Arabia could repair the pipeline soon. In The Arora Report analysis, prudent investors should note that technical hurdles remain and Houthis can attack the pipeline again at any time.
- President Xi of China will be meeting President Trump. Secretary Bessent says he has had productive talks with his counterpart ahead of the summit. In The Arora Report analysis, prudent investors should note that there are tough issues regarding Taiwan, trade, and AI. Irrespective of this morning’s hopium, China is going to continue its quest to get ahead of the U.S. in AI and to replace the U.S. as the world’s superpower.
- Bitcoin jumping over $85K is creating significant positive sentiment that is resulting in buying in tech stocks. In The Arora Report analysis, a large number of investors who aggressively buy bitcoin also aggressively buy speculative tech stocks. Further in The Arora Report analysis, prudent investors should note the jump in bitcoin is primarily the result of a short squeeze. Short squeezes tend to end.
- President Trump has been wanting to make Greenland part of the U.S. Now, the matter has been resolved. There is a deal that falls short of a takeover but allows the U.S. to expand its military presence in Greenland and permanently bars China and Russia from investing in Greenland. Shares of Greenland related stocks such as Greenland Energy (GLND), Greenland Mines (GRML), and Critical Metals (CRML) are jumping.
- For those who want deeper knowledge, listen to the podcast titled “THE NEXT PHASE OF AI PART 5 – MARKET MAY FRONT RUN EARNINGS AS FED AND JAPAN TIGHTEN GLOBAL LIQUIDITY” that will be published shortly in Arora Ambassador Club.
- Anthropic’s IPO now appears to be scheduled for November. This is generating additional enthusiasm for AI stocks.
- Nasdaq quarterly rebalancing that takes effect today increases SpaceX (SPCX) weighting to 2.82% from 1.28%. This is causing index funds to buy SPCX stock.
- 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), Alphabet (GOOG), Meta (META), Nvidia (NVDA), Microsoft (MSFT), and Tesla (TSLA).
In the early trade, money flows are neutral 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. This is reflected in gold ETF (GLD), silver ETF (SLV), gold miner ETF (GDX), and silver miner ETF (SIL). 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 down, and bonds are ticking up.
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 7761 as of this writing. S&P 500 futures resistance levels are 7795, 7831, and 7900 : support levels are 7733, 7626, and 7541.
DJIA futures are up 403 points.
Gold futures are at $4358, silver futures are at $67.14, and oil futures are at $93.55.
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.
