By Nigam Arora
To gain an edge, this is what you need to know today.
Impact On Carry Trade
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows tech stocks are back to the top band of zone 1 (resistance).
- The chart shows QQQ did not dip to the lower half of zone one before bouncing. This is a positive.
- After today, liquidity will dramatically drop. Expect momo gurus to take advantage of lower liquidity to push their followers to aggressively buy tech stocks. Expect momo gurus to try their best to push QQQ to a new high.
- Momo gurus already have very bullish projections for 2026. Prudent investors need to understand that momo gurus are like a one way street — they are perma bulls — always bullish.
- Tech stocks have a potential to be impacted negatively due to the Bank of Japan (BOJ) raising its key rate. Often, there is a significant delay in the impact.
- BOJ raised its key rate to 0.75% from 0.5%. The rate has been at 0.5% since January 2025. 0.75% is the highest rate in Japan since 1995.
- BOJ Governor Ueda is indicating that further rate hikes may be ahead.
- The 10-year Japanese Government Bond (JGB) has risen above 2%.
- In The Arora Report analysis, after years of deflation, inflation is now taking hold at around 3% in Japan. Deflation kept interest rates near zero for a long time.
- Further in The Arora Report analysis, BOJ will also have to face the fact that the Japanese economy is losing momentum. This will make it harder to raise rates significantly.
- Interest rates in Japan have been important for the carry trade. Over the last couple of years, funds have been borrowing money in Japan and investing in the AI trade in the U.S. These funds are highly leveraged. As such, they will come under pressure and reduce their borrowings and sell some of their AI holdings if BOJ continues to raise rates.
- The inflation data released by the US government is flawed. Due to the government shutdown, the government was unable to gather some data. The government imputed some numbers. In The Arora Report analysis, it is highly likely that actual inflation data was higher than the released data. At any other time of the year, the realization that the released data was flawed would have negatively impacted the stock market. However, today, the stock market is focused on positive seasonality ahead, ignoring that yesterday’s rally was on flawed CPI data.
- New York Fed President John Williams says that he does not see a “sense of urgency” to cut the Fed fund rate. Williams eventually sees rates lower than where they are now.
- Lately, Oracle (ORCL) stock has been under pressure due to its plan to heavily borrow to build data centers. This morning, ORCL stock is jumping on news TikTok owner ByteDance has formed a new joint venture for its new U.S. business. Oracle is a part owner of the joint venture. The joint venture will be responsible for data protection, algorithmic security, content moderation, and software assurance.
- Positive seasonality is ahead. In anticipation of positive seasonality ahead, money flows into U.S. stocks are becoming large. If history is a guide, smart money buying now will exit the positions they are buying now by the end of the year. The momo crowd will continue to hold.
- Today is triple witching. In triple witching, stock futures, stock index options, and stock options expire. Triple witching often leads to volatility.
- In important earnings, Nike (NKE) reported earnings better than consensus. Nike’s business is doing well in the U.S. NKE stock is tumbling because of headwinds in China. FedEx (FDX) reported earnings better than consensus but worse than whisper numbers. Prudent investors pay attention to FedEx earnings because they are an important indication of the economy.
- The release of PCE and personal income and spending data is delayed.
- 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 Amazon (AMZN), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA).
In the early trade, money flows are neutral in Alphabet (GOOG) and Meta (META).
In the early trade, money flows are negative in Apple (AAPL).
In the early trade, money flows are neutral in S&P 500 ETF (SPY) and positive in 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.
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. 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 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 6835 as of this writing. S&P 500 futures resistance levels are 7000 and 7200 : support levels are 6780, 6500, and 6256.
DJIA futures are down 26 points.
Gold futures are at $4363, silver futures are at $66.06, and oil futures are at $56.43.
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.
