By Nigam Arora
To gain an edge, this is what you need to know today.
Stock Market Manias
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 zone 1 (support). There is a fair probability of the stock market pulling into zone 1 over the next two months. The upcoming SpaceX (SPCX) IPO is so massive that its post IPO behavior will have a major impact on when and how a pullback occurs in the broader stock market. The reason is the rules are being changed for early inclusion of SPCX in the indexes. Those wanting a deeper understanding may consider listening to the podcast in Arora Ambassador Club.
- The chart shows volume continues to be low. The traditional interpretation of volume is not applicable here because investors are not buying stocks and are instead caught up in the options mania.
- Prudent investors should note that three of the biggest IPOs are coming. These IPOs are going to absorb a large amount of capital. Some of this capital will come from selling other popular stocks. These IPOs are:
- SpaceX $75B+
- OpenAI $50B – $150B
- Anthropic $40B – $60B
- Significant buying has occurred in the stock market on a report that the U.S. and Iran have reached a deal to extend the ceasefire by 60 days. According to the report, the deal is pending President Trump’s approval. News of the deal has also caused selling in oil and buying in bonds.
- Dell (DELL) reported blowout earnings driven by demand for AI servers. Dell specifically highlighted the memory shortage. This is benefiting the stocks of Micron (MU) and Sandisk (SNDK). Dell earnings are giving a second wind to the semiconductor mania, including the stocks of Dell’s suppliers Intel (INTC) and Advanced Micro Devices (AMD). The reaction in Nvidia (NVDA) stock is muted.
- Jeff Bezos’s space company Blue Origin’s New Glenn rocket exploded on the launch pad. The rocket explosion happened as the space mania is in full swing among the momo crowd. Space stocks such as AST SpaceMobile (ASTS), Firefly Aerospace (FLY), Intuitive Machines (LUNR), Voyager Technologies (VOYG), and Rocket Lab (RKLB) are pulling back as of this writing in the premarket. This is also not great news for Amazon (AMZN) as some of Amazon’s plans count on Blue Origin’s success. The incident also highlights that rockets are difficult and how well Elon Musk’s SpaceX has done.
- 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.
Japan
Finance Minister Katayama is warning Japan may engage in currency intervention at any time. Japan is important due to the carry trade. In the carry trade, funds have borrowed hundreds of billions of dollars in Japan and invested in the U.S., lately in the AI trade.
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 Microsoft (MSFT) and Nvidia (NVDA).
In the early trade, money flows are neutral in Apple (AAPL).
In the early trade, money flows are negative in Amazon (AMZN), Tesla (TSLA), Alphabet (GOOG), and Meta (META).
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 range bound.
Markets
Interest rates and bonds are range bound.
The dollar is range bound.
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 7591 as of this writing. S&P 500 futures resistance levels are 7700, 7900, and 8000 : support levels are 7320, 7195, and 7000.
DJIA futures are up 135 points.
Gold futures are at $4549, silver futures are at $75.81, and oil futures are at $87.35.
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.
