By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Look Ahead
Please click here for a chart of semiconductor ETF SMH.
Note the following:
- Semiconductors are the leading sector. Advances in semiconductors are also at the core of the artificial intelligence revolution. Therefore prudent investors always pay attention to semiconductors.
- The chart shows a decisive up move in semiconductors after the breakout.
- RSI on the chart shows semiconductors are very overbought. Overbought markets tend to be vulnerable to the downside.
- Market mechanics are very powerful and have been the primary force driving the stock market higher. The chart of semiconductors illustrates the sharp move up since the end of October. The easiest way to learn about market mechanics is to listen to the podcasts in Arora Ambassador Club. Due to their high value, Wall Street professionals keep market mechanics secret. There is very little credible and useful information available publicly.
- Market mechanics that have been driving the stock market higher are going to end no later than December 29, 2023.
- The smartest of smart money recognizes that these market mechanics are going to end, so they start acting before the market mechanics end. Momo crowd is always oblivious, and the smartest of smart money simply takes advantage of the momo crowd.
- New market mechanics will start on January 2, 2024.
- Here are some of the steps that may need to be taken prior to the end of the year or immediately after the new year starts.
- Raising hedges
- Raising cash
- Taking profits on tactical positions
- This is simply a heads-up. We will provide more guidance as more data becomes available.
- In The Arora Report analysis, the start of the new year will likely be the same as every other new year after a strong year for the stock market — if the stock market starts going down, everyone will jump on the selling bandwagon; if the stock market starts going up, everyone will buy. If the stock market starts going down, there will be additional selling pressure from selling by those who want to sell stocks but are postponing the selling to 2024 for tax reasons.
- 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.
Strong Housing Starts
Housing starts are very strong. Housing starts came at 1.56M vs. 1.36M consensus.
Building permits came at 1.46M vs. 1.46M consensus.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).
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.
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
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 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.
Gold futures are at $2044, silver futures are at $24.24, and oil futures are at $72.82.
S&P 500 futures are trading at 4802 as of this writing. S&P 500 futures resistance levels are
DJIA futures are up 64 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.
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 seven 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.
