By Nigam Arora
To gain an edge, this is what you need to know today.
Buying In Semis
Please click here for a chart of leveraged semiconductor ETF (SOXL).
Note the following:
- Semiconductors are the leading sector that has been driving the stock market higher. SOXL is the momo crowd’s favorite semiconductor ETF.
- The chart shows that after breaking below the low band of zone 2 (resistance), semiconductors are rising again and approaching the low band of zone 2 again.
- The pattern shown on the chart has two implications:
- It is a short term bottoming pattern confirmed by heavier volume shown on the chart.
- Stops have already been hunted, making it easier for SOXL to rise now.
- The true test of the rally in semiconductors will be if SOXL breaks above the high band of zone 2.
- This morning in the early trade, there is aggressive buying in semiconductor stocks on the news that mediators are proposing a 10 day ceasefire between the U.S. and Iran. As a member of The Arora Report, as usual, you have been ahead of the curve. We wrote in yesterday’s Morning Capsule before the stock market opened:
Last night, oil was spiking after a series of escalating attacks by the U.S. on Iran and counterattacks by Iran on U.S. allies in the Middle East. This morning, the situation has calmed down on an Iranian report that mediators are working on a proposal for a 10 day ceasefire.
- The momo gurus’ soap opera continues. Many momo gurus who never recommended semiconductor stocks until a few months ago and missed the big gains in semiconductors since 2022 are now claiming to be semiconductor experts. When there is good news related to the Iran conflict, momo gurus urge their followers to buy semiconductors because cessation of hostilities with Iran will be good for semiconductors. When there is bad news related to the Iran conflict, momo gurus urge their followers to buy semiconductors because the Iran conflict has nothing to do with semiconductors.
- There are two other factors driving buying in semiconductor stocks this morning:
- Lately semiconductors in the U.S. market have been following the South Korean stock market. Overnight, Kopsi index in South Korea was up 3.6%.
- As is the pattern of the momo crowd, there is significant hopium this morning that upcoming semiconductor earnings will be good. Intel (INTC) reports on Thursday after the market close.
- Buying in the early trade is especially aggressive in memory stocks and disk drive stocks including Micron (MU), SK Hynix (SKHY), Western Digital (WDC), and Seagate (STX) as well as memory ETF (DRAM).
- Buying in the early trade is also aggressive in networking stocks such as Marvell (MRVL) and optical stocks, including Corning (GLW), Applied Optoelectronics (AAOI), Coherent (COHR), and Lumentum (LITE).
- In the middle of the bullishness this morning, prudent investors should note that to persuade Iran to give concessions, President Trump is considering a massive military campaign with Israel against Iran. In The Arora Report analysis, if any such campaign occurs, it will likely be short lived as President Trump is under pressure from Republicans to keep an eye on the midterm elections.
- 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.
China
There are two important pieces of news from China:
- The Chinese government is considering taking measures to boost confidence in the Chinese stock market.
- The Chinese government’s efforts to restrict the export of advanced Chinese AI technology to the West are picking up steam.
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), Nvidia (NVDA), and Tesla (TSLA).
In the early trade, money flows are neutral in Amazon (AMZN) and Alphabet (GOOG).
In the early trade, money flows are negative in Apple (AAPL) and Microsoft (MSFT).
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 *** in 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 and bonds are range bound.
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 7516 as of this writing. S&P 500 futures resistance levels are 7700, 7900, and 8000 : support levels are 7318, 7194, and 7032.
DJIA futures are up 130 points.
Gold futures are at $4057, silver futures are at $59.28, and oil futures are at $84.16.
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.
