By Nigam Arora & Dr. Natasha Arora

To gain an edge, this is what you need to know today.

Market Cap Divergence

Please click here for a chart of S&P 500 Equal Weight ETF (RSP) compared to S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).

Note the following:

  • The chart shows that for the period shown on the chart, equal weighted S&P 500 has lost 1.94%, while cap weighted S&P 500 has gained 6.96%.  This indicates that S&P 500 is being driven by mega caps.
  • Investors need to be mindful that the top ten stocks in S&P 500 by capitalization are responsible for 35% of the market capitalization.  The top ten stocks are Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Nvidia (NVDA), Alphabet Class A (GOOGL), Tesla (TSLA), Alphabet Class C (GOOG), Berkshire Hathaway (BRK.B), Meta (META), and United Health (UNH).  However, these top ten stocks are responsible for only 23% of the earnings.
  • The driving force behind nine of the top ten stocks is the AI frenzy.
  • In The Arora Report analysis, the divergence between market capitalization and earnings is the greatest in recent memory.  This indicates the following:
    • Future earnings expectations from the top ten stocks are extraordinarily high.
    • There is significant risk to this market if these extraordinarily high expectations are not met.  
  • Sentiment continues to be extremely bullish.
  • In the early trade, there is buying, mostly by retail investors based on the weekend pump.
  • The foregoing is an example of quantitative analysis.  Prudent investors use 360 degree analysis such as the one provided by a combination of ZYX Change Method and the adaptive ZYX Asset Allocation Model with inputs in ten categories. The best results are obtained by combining the best elements of quantitative analysis, macro analysis, fundamental analysis, and technical analysis.
  • Technical analysis of this market continues to be very bullish.
  • Macro analysis and fundamental analysis show risks.
  • 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.


There is a shocker in the French election results.  Polls were projecting the far right National Rally to be the largest winner.  In a surprise, far left parties won the most seats.  The far left’s total of 182 seats falls short of the 289 majority required to form a government.   France appears to be entering an era similar to Italy.  In The Arora Report analysis, for investors these results are better than if the far right would have won an absolute majority.

Magnificent Seven Money Flows

In the early trade, money flows are positive in AAPL, AMZN, NVDA, MSFT, GOOG, and META.

In the early trade, money flows are negative in TSLA.

In the early trade, money flows are neutral 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.


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.


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 (BTC.USD) is range bound and trading around $57,000.


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 and bonds are range bound.

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 $2382, silver futures are at $31.32, and oil futures are at $82.69.

S&P 500 futures are trading at 5628 as of this writing.  S&P 500 futures resistance levels are 5926 and 5748 : support levels are 5622, 5500, and 5400.

DJIA futures are up 108 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 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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Picture of Nigam Arora

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.

Picture of Dr. Natasha Arora

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.

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