By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Trump Reveal Ahead
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart of QQQ is important because it mostly represents tech stocks.
- The chart shows that the rally from the March 11 low failed before reaching the top band of the resistance zone. This is a negative.
- The chart shows that QQQ failed at the 200 day moving average. To the legions of investors who believe in the power of the 200 day moving average, this is a negative.
- The chart shows yesterday’s low decisively undercut the March 11 low. This is a negative.
- Stops of those who follow traditional technical analysis were taken out at the open yesterday. Smart money consistently picks the pockets of those following traditional technical analysis. The Arora Report has aligned its systems with smart money. Consider using stop zones and target zones given in the Real Time Feeds instead of basing stops on traditional technical analysis.
- RSI on the chart is showing a positive divergence. In plain English, this means that the internal momentum of tech stocks is not as negative now as it was when tech stocks were higher. This is a positive. Many momo gurus are citing the positive RSI divergence to persuade their followers to buy stocks.
- The chart shows the dramatic reversal yesterday from the lows. The dramatic reversal to the upside was due to market mechanics. The two market mechanics most responsible for the move up from the lows were quarter end rebalancing and short squeeze.
- There is another market mechanic at play today. Blind money will pour into Wall Street. Blind money is the money that pours in on the first day of the month without any analysis and irrespective of market conditions. Blind money flows are especially strong on the first two days of a new quarter.
- Tomorrow is Liberation Day. President Trump has decided on a plan, but he has not revealed it. Presumably the plan will be released tomorrow on Liberation Day. However, prudent investors need to keep in mind that President Trump is unpredictable, and he may release the plan earlier. Or, there may be leaks and rumors that move the market.
- There are divergent opinions on how the stock market will behave after Trump reveals his tariff plan on Liberation Day.
- Permabulls are expecting a rip-roaring rally and urging their followers to aggressively buy stocks.
- Permabears are expecting a big market drop.
- In The Arora Report analysis, prudent investors should ignore both the permabulls and the permabears.
- In The Arora Report analysis, how the market behaves after Trump’s reveal will come down to the difference between expectations about tariffs that are built into the market and what Trump reveals.
- If the tariffs Trump reveals are less onerous than market expectations, the stock market will go up.
- If the tariffs Trump reveals are more onerous than market expectations, the stock market will go down.
- In the early trade, stocks are trading lower as the buying pressure from rebalancing goes away. Blind money is mostly invested in the afternoon. There is some buying in the early trade as Wall Street tries to front run and profit from blind money. Often, Wall Street traders buy in the morning at lower prices and then sell to blind money at higher prices in the afternoon. However, such buying this morning is somewhat muted due to the risk of tariff rumors and leaks.
- ISM Manufacturing and JOLTS job openings will be released at 10am ET and may be market moving.
- As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band. The protection band is one of the large number of unique edges that are available to members of The Arora Report.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Nvidia (NVDA) and Tesla (TSLA).
In the early trade, money flows are negative in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Apple (AAPL).
In the early trade, money flows are negative 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 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.
Very Very Short-Term Indicator
Our very, very short-term early stock market indicator is indeterminable as the market will move based on tariff eaks and rumors. 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 *** in 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 are ticking down, and bonds are ticking up.
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 5641 as of this writing. S&P 500 futures resistance levels are 5748, 5926, and 6017: support levels are 5622, 5500, and 5400..
DJIA futures are down 128 points.
Gold futures are at $3164, silver futures are at $34.72, and oil futures are at $71.53.
Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror. The proprietary protection band from The Arora Report is very popular. The 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.
Dr. Natasha Arora
Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.
