By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Contrasting Moves
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 the stock market pulled back to the top band of the top support zone on rising yields.
- This morning the stock market is moving up, bouncing from the support zone on news from the Middle East.
- Prudent investors should notice a statement by Iran’s Foreign Minister Hossein Amirabdollahian in Beirut, Lebanon. He warned that there was a “real possibility” of opening other fronts if Israel continues to intensify the war in Gaza.
- Prudent investors should also pay attention to a statement by Ali Barakeh, a senior Hamas official, that Iran and Hezbollah “will join the battle if Gaza is subjected to a war of annihilation.”
- Of special interest is that the momo crowd aggressively bought stocks on these two statements, while smart money is buying safe havens of dollar, Treasuries, gold, and silver.
- Israel has ordered 1.1M Palestinians living in northern Gaza to evacuate within 24 hours and move to southern Gaza.
- The problem is that Gaza is one of the most densely populated places on Earth. It is very small – only 140 square miles. It appears that there is simply not enough space in southern Gaza for 1.1M more people.
- The United Nations is warning that the evacuation order is “impossible and could result in devastating humanitarian consequences.”
- The momo crowd is aggressively buying stocks on the Israeli evacuation order. Smart money is buying safe havens of dollar, Treasuries, gold, and silver.
- Bank earnings this morning from JPM, WFC, C, and PNC are better than expected. Earnings from UNH, the largest healthcare insurer, are also better than expected.
- Prudent investors should note that Jamie Dimon, the CEO of JPM and the most respected banker in the world, is saying in the JPM earnings report that “now may be the most dangerous time the world has seen in decades.”
- In view of the news from the Middle East and Jamie Dimon’s statement, investors should pay attention to money flows in the Magnificent Seven stocks and indexes. Please see the section below.
- In The Arora Report analysis, it is important that investors pay attention to not only what is happening but how the market is responding. Stocks are being bought on trust in market mechanics pushing the stock market higher.
- Some of the buying in the stock market is being triggered by Danish company Novo Nordisk (NVO) raising its growth targets due to the popularity of weight loss drugs Ozempic and Wegovy. Eli Lilly (LLY) stock is also moving up in sympathy.
- 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.
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 *** stocks in the early trade.
Gold
The momo crowd is *** gold in the early trade. 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 range bound.
Markets
Our very, very short-term early stock market indicator is ***. Keep in mind today is Friday, and there will be two opposing crosscurrents. On the positive side, if the market continues to move up there will likely be a short squeeze. On the negative, many institutional investors will likely lighten up by selling into the strength not wanting to take the risk of news from the Middle East going into the weekend. 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 $1924, silver futures are at $22.63, and oil futures are at $86.12.
S&P 500 futures are trading at 4394 as of this writing. S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.
DJIA futures are up 120 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 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.
