By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Deploy Cash And Reduce Hedges
The Arora Report’s highest probability scenario has come true in the Israel Iran war. This scenario was given in advance as the highest probability scenario on June 13 morning, just after Israel’s first attack. As has been the case for the last 18 years, members of The Arora Report were once again ahead of the curve and had clarity at a time when there was a lot of confusion among most investors. Clarity and getting ahead of the curve are two pillars to maximizing the wealth you generate over your lifetime.
A ceasefire has been reached between Iran and Israel. In The Arora Report analysis, immediately following a ceasefire, small infractions are historically common in war and should not concern investors. It is time to deploy cash and reduce hedges, preferably on pullbacks. Please see the section “Arora Protection Band And What To Do Now” below.
Spot On Call
Please click here for a chart of oil futures (CL_F). The chart of oil is important because oil is the most sensitive indicator of events in the Middle East.
Note the following:
- The chart shows a slight rise in oil prices when the news broke on Qatar closing its airspace.
- The chart shows oil started dropping even before the news broke that Iran had informed Qatar and the U.S in advance of the missile attack.
- The chart shows the continued dramatic fall in oil prices.
- The chart shows another leg lower in the evening when speculation started to build that a ceasefire was in the works. The speculation turned out to be correct, leading to another dip.
- Here is the most important point for prudent investors: yesterday, oil prices led stock prices. Investors should always be looking out for leading indicators.
- Investors should always be looking for what smart money is doing. Yesterday, smart money was selling oil on the news of Iran’s attack on the U.S. military base in Qatar while the momo crowd was panicking and selling stocks on the news. Smart money bought stocks on the dip caused by momo crowd selling. It is important to remember the momo crowd is driven by momo gurus, news headlines, price momentum, social media, and sentiment. In contrast, smart money is driven by deep knowledge and 360 degree analysis.
- Getting ahead has its advantages. For example, in anticipation of this scenario, The Arora Report recently gave signals to take partial profits on defense stock RTX, gold ETF GLD, and gold miner NEM in advance of the ceasefire. This morning, gold and defense stocks are falling on the news of a ceasefire.
- President Trump is heading to a NATO summit. The summit is likely to be contentious due to differing opinions on defense spending between NATO members. The results of the NATO summit may provide more opportunities.
- This morning, the momo crowd is aggressively buying stocks.
- Fed Chair Powell will testify at 10am ET today before the House Financial Services Committee. In The Arora Report analysis, Powell will come under intense pressure to agree to cut rates.
- Prudent investors should note that cracks are appearing in the FOMC’s united front under pressure from President Trump. The Fed’s Bowman and Waller have come out in favor of rate cuts. You guessed it right – both Bowman and Waller are Republicans and were appointed by President Trump. Both may be trying to compete for the job of the next Fed Chair – they need to be in President Trump’s good graces.
- In The Arora Report analysis, as politics enter the Fed in a big way, risks will rise for long term investors. Long term investors will need to be vigilant and be ready to not only generate wealth but protect their wealth. The easiest way is to stay tuned to the Morning Capsules and the Arora Protection Band.
- Consumer confidence 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
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 aggressively buying stocks in the early trade. Smart money is inactive 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 *** (To see the locked content, please take a 30 day free trial). 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 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 along with buying in speculative stocks.
Markets
Interest rates are ticking up, and bonds are ticking down.
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 6119 as of this writing. S&P 500 futures resistance levels are 6131, 6256, and 6500: support levels are 6017, 5926, and 5748.
DJIA futures are up 307 points.
Gold futures are at $3328, silver futures are at $35.79, and oil futures are at $66.37.
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.
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.
