By Nigam Arora
To gain an edge, this is what you need to know today.
Correction Trigger
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 is way above the 200 day moving average (shown in yellow).
- The chart shows zone 1 will act as support on any pullback.
- Jamie Dimon, CEO of JPMorgan Chase (JPM), is the smartest banker in the world. Here are the key points from what Dimon is saying:
- Dimon thinks the chance of a correction is much higher than what is generally believed.
- Dimon says that if others think the chance of a correction is 10%, he thinks the chance of correction is 30%.
- Dimon thinks most people will lose money on AI.
- Dimon thinks that instead of accumulating cryptos, “we should be stockpiling bullets, guns, and bombs.”
- You already know that The Arora Report analysis agrees with what Dimon is saying.
- In The Arora Report analysis, here is what is very important that Dimon is not saying:
- Dimon represents smart money, but the stock market is controlled by the momo crowd. The momo crowd does not do any analysis and does not take risk into account. They simply buy stocks on the belief that stocks are going to the moon.
- The retail investor component of the momo crowd has now become totally reckless. The retail buying of stocks last month was the largest on record, coming at $105B. Year-to-date, retail investors have bought $630B worth of stock. The previous record was $590B in 2021.
- Retail investors are not buying blue chips stocks. They are buying stocks like Bitmine Immersion Technologies (BMNR), Strategy (MSTR), Rocket Lab (RKLB), Nebius (NBIS), IREN (IREN), Rigetti (RGTI), and IonQ (IONQ).
- After record retail buying in 2021 when retail investors were buying highly speculative stocks and SPACs, 2022 saw a bear market with Nasdaq losing 33%. Most momo crowd portfolios lost 70% – 95%.
- For the reckless momo crowd behavior to stop, there has to be a trigger. The trigger in 2022 was the Fed raising interest rates.
- In contrast, in 2025 and going into 2026, the Fed is cutting interest rates even though the data does not justify it. The Fed is simply spiking the punch bowl.
- In The Arora Report analysis, here is the most important point for prudent investors – momo crowd insanity can go on for a long time, driving the stock market much higher in the absence of a trigger to stop it. To complicate the situation further, history teaches a trigger often comes from nowhere and in a manner no one has foreseen. The best way to handle this situation so that you can generate wealth and protect wealth at the same time is to follow the Arora Protection Band.
- In yesterday’s Morning Capsule, we shared with you that China was restricting the export of rare earths to gain leverage in talks with the U.S. President Trump is considering responding. As a result, money is flowing into rare earth stocks in the early trade, including three in the Arora Portfolio: USA Rare Earth (USAR), MP Materials (MP), and Critical Metals (CRML).
- To put further pressure on the U.S., China is opening an anti-trust probe into Qualcomm’s (QCOM) Autotalks deal.
- University of Michigan Consumer Sentiment will be released at 10am ET and may be market moving.
- 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 Nvidia (NVDA) and Tesla (TSLA).
In the early trade, money flows are neutral in Alphabet (GOOG), Microsoft (MSFT), and Meta (META).
In the early trade, money flows are negative in Apple (AAPL) and Amazon (AMZN).
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. 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 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.
S&P 500 futures are trading at 6783 as of this writing. S&P 500 futures resistance levels are 7000 and 7200 : support levels are 6780, 6500, and 6256.
DJIA futures are up 74 points.
Gold futures are at $4003, silver futures are at $48.26, and oil futures are at $60.24.
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.
