By Nigam Arora
To gain an edge, this is what you need to know today.
Ahead Of The Curve
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 the stock market has now moved above the upper band of zone 1. Zone 1 was previously resistance and is now support.
- The chart shows the stock market is now close to the magnet.
- The chart shows the volume on the rally has remained low.
- RSI on the chart shows the stock market is very overbought. Overbought markets tend to be vulnerable to a selloff.
- President Trump is saying the Iran war is “close to over.”
- Many investors are aggressively buying now after President Trump’s statement. Such investors feel that now it is all clear. Buying here is a classic mistake for the following reasons:
- The stock market is very overbought.
- It is near the magnet.
- Volume is low.
- It is after a major rally.
- The right course of action is to buy either on a pullback or on a decisive break above the magnet.
- Interestingly, investors who are buying now are the same investors who were selling when the stock market was hitting recent lows near the low band of zone 2 (support). The reaction of these investors is understandable because they were protecting themselves when the stock market went lower than they expected. Now, they are buying because they feel it is all clear.
- Prudent investors need to know that markets always move before it is all clear, as shown on the chart.
- Prudent investors also need to have access to a structured, dynamic system with a long track record in both bull and bear markets such as the Arora Protection Band so that decisions are well grounded in data, history, and 360 degree forward looking analysis. The Arora Protection Band raised cash and hedges one day before the war started. In real life it does not get any more perfect. Then The Arora Report started deploying cash well before the steepest part of the market rise.
- Among notable earnings today Bank of America (BAC) reported earnings better than whisper numbers. BAC is in the ZYX Buy Core Model Portfolio, long from an average of $7.69. BAC is trading at $54.19 as of this writing in the premarket, representing a gain of 605%.
- Another important earning today is from Dutch company ASML (ASML). ASML is the undisputed leader in extreme ultraviolet lithography machines. Without ASML’s machines, none of the advanced AI chips could have been manufactured. ASML beat earnings and revenue consensus and whisper numbers but is guiding Q2 revenue below consensus. Guidance for FY26 is inline.
- During this rally, semiconductors have been the hottest sector. The rally in semiconductors has been driven mostly by a short squeeze and extremely aggressive momo crowd buying. The momo crowd believes the AI trade is finally back again. After ASML earnings, how semiconductors respond today will be an important tell.
- Nvidia (NVDA) stock has finally been rallying over the last few days. NVDA closed at $196.51. As of this writing In the premarket, NVDA is trading at $195.51 due to ASML earnings. The psychological resistance level of $200 is ahead. How NVDA stock behaves around the psychological resistance will also be a tell.
- The Fed’s Beige Book will be released at 2pm ET.
- 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 Meta (META), Microsoft (MSFT), and Tesla (TSLA).
In the early trade, money flows are neutral in Apple (AAPL) and Amazon (AMZN).
In the early trade, money flows are negative in Alphabet (GOOG) and Nvidia (NVDA).
In the early trade, money flows are neutral 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 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
API crude inventories came at a build of 6.1M barrels vs. a consensus of a draw of 1.3M barrels.
The momo crowd is *** in oil in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Among bitcoin (BTC.USD) bulls, there is a lot of bullishness, and they believe bitcoin will reach $100K shortly. The bullishness is driven by President Trump’s comments on the end of the Iran war. This once again shows bitcoin is not a hedge, as has been promoted, but is a highly speculative risk asset.
Bitcoin is range bound.
Markets
Interest rates are ticking up, and bonds are ticking down.
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 7007 as of this writing. S&P 500 futures resistance levels are 7200,7500, and 7700 : support levels are 7000, 6780, and 6600.
DJIA futures are up 39 points.
Gold futures are at $4833, silver futures are at $78.85, and oil futures are at $92.15.
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.
