By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Protect Your Wealth
Please click here for a chart of U.S. dollar index (USDX, DX, DXY).
Note the following:
- Investors need to pay attention to the dollar to protect their wealth if their wealth is in dollars or tied to the dollar.
- The chart is a weekly chart to give you a longer term perspective.
- The chart shows the dollar is at the top band of the support zone.
- The chart shows the dollar made a double top. This is a negative pattern.
- RSI on the chart shows the dollar is oversold, which could lead to a bounce in the short term.
- The chart shows that if the support zone is broken, there is significant room for the dollar to fall.
- The U.S. owes its economic prosperity and its status as the sole superpower in large part to the dollar being the world’s reserve currency.
- Most of the world’s trade is conducted in dollars.
- China is determined to replace the U.S. as the world’s sole superpower. The Chinese and Russian governments understand that the key to achieving their objectives is to weaken the dollar and replace the dollar as the reserve currency.
- China and Russia have accelerated their attacks on the U.S. dollar. They have the support of BRICS. BRICS is a bloc that has consisted of Brazil, Russia, India, China, and South Africa. Six more countries have joined the BRICS bloc. The new countries are Iran, Egypt, Ethiopia, Argentina, Saudi Arabia, and U.A.E.
- All investors should take steps to protect their wealth. Investors should consider emerging markets, other developed markets, currencies when appropriate, gold, commodities, and commodity producers including metal producers.
- The easiest way to accomplish your objective is to look at The Arora Report’s Model Portfolios in ZYX Allocation and ZYX Emerging.
- The world is interconnected. Oil prices are jumping about 3% this morning on trouble in Libya. Libya is a divided country with two rival governments – Tripoli based government and Benghazi based government. The Benghazi government has shut down all crude oil exports. This is in response to the Tripoli based government replacing the leadership of the central bank.
- Many media headlines are wrong in claiming that oil prices are jumping on Israel conducting a preemptive attack on Lebanon on Sunday and Hezbollah responding. The conflict between Israel and Hezbollah has no direct impact on oil unless Iran directly gets involved. So far, Iran has not been directly involved.
- The real reason oil prices are jumping is coming from Libya.
- Investors need to pay attention to oil prices because one of the reasons behind inflation coming down is the lower price of oil. The Fed is planning to cut rates because of lower inflation. The stock market has been going up on hopes of a rate cut. If the price of oil shoots up, inflation will rise, limiting the Fed’s ability to cut rates. Such a scenario will be negative for the stock market, which is trading at a very high valuation.
- Durable goods data is mixed.
- Durable Orders came at 9.9% vs. 4.0% consensus.
- Durable Orders Ex-Transport came at -0.2% vs. 0.1% consensus.
- 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 neutral in Apple (AAPL), Alphabet (GOOG), Nvidia (NVDA), and Microsoft (MSFT).
In the early trade, money flows are negative in Amazon (AMZN), Meta (META), and Tesla (TSLA).
In the early trade, money flows are mixed 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.
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 *** oil in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is approaching $64,000. The recent rise has rekindled hopes of bitcoin making a new high and then going to $100,000.
Markets
Our 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.
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.
Gold futures are at $25460, silver futures are at $29.86, and oil futures are at $77.28.
S&P 500 futures are trading at 5661 as of this writing. S&P 500 futures resistance levels are 5748 and 5926: support levels are 5622, 5500, and 5400.
DJIA futures are up 73 points.
Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding *** in cash or Treasury bills 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.
