By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Outperforming Markets
Please click here for a chart comparing S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX), Nasdaq 100 ETF (QQQ), Euro Stoxx 50 ETF, Mexico EFT (EWW), and emerging markets ETF (EEM).
Note the following:
- The Arora Report’s call was to buy tactical positions on President Trump’s re-election and sell on the inauguration. That call has now proven spot on.
- The chart shows that since Trump’s inauguration, SPY is down 6.2% and QQQ is down 8.01%.
- Wall Street’s consensus call was that the U.S. stock market would go higher after Trump’s inauguration. The chart shows that so far Wall Street’s call has been wrong.
- Another consensus call from Wall Street has also been proven wrong. Wall Street’s call was that Nasdaq 100, which is mostly tech stocks, would outperform S&P 500. The chart shows tech stocks have under performed S&P 500 by 1.9%.
- More striking is that, as shown on the chart, emerging market stocks have outperformed the U.S. stock market by 12.78%.
- Even more remarkable, as is shown on the chart, is that large European stocks have outperformed the U.S. stock market by 17%.
- Most remarkable is that the Mexican stock market has outperformed the U.S. stock market by 16.35%.
- After analyzing the new administration’s policies, Wall Street’s consensus call was to sell emerging market stocks, including Mexican stocks, and European stocks. Further, Wall Street’s consensus was to put the money from selling international stocks into U.S. tech stocks. Wall Street made two supportive arguments:
- After Trump’s inauguration, U.S. exceptionalism would take center stage.
- Tariffs would hurt emerging markets, including Mexico, and Europe.
- Here are the three lessons from the foregoing:
- A well diversified portfolio is a component of maximizing the wealth investors extract from the markets. Diversification should include international markets.
- Follow Arora’s Second Law of Investing and Trading that states “Nobody knows with certainty, what is going to happen next in the markets.” Make decisions based on Arora’s Third Law that states, “Making investing and trading decisions based on probabilities is the only realistic and profitable approach.” Arora’s Thirty Laws of Investing and Trading are the foundation of achieving high risk adjusted returns.
- Prudent investors cannot rely solely on Wall Street consensus and media, as they are often wrong.
- In The Arora Report analysis, Wall Street’s call was wrong because Wall Street did not do a 360 degree analysis. Wall Street was focused on only one viewpoint as it suffered from recency bias. The recency bias was that Trump’s second term would be the same as Trump’s first term. Of course, as a member of The Arora Report, you knew in advance that Trump’s second term was going to be different from Trump’s first term. Those investors who read the Morning Capsules with a neutral lens benefited.
- At Nvidia’s (NVDA) GPU Technology Conference 2025 (Nvidia GTC), the key event today is Nvidia CEO Jensen Huang’s keynote speech at 1pm ET. Huang’s speech is extremely important as it will determine the direction of artificial intelligence stocks and, in turn, the entire stock market.
- The FOMC meeting starts today. The rate decision will be announced tomorrow at 2pm ET followed by Chair Powell’s press conference at 2:30pm ET.
- In The Arora Report analysis, the move up in the stock market over the last two days has been a result of the following:
- A viscous short squeeze
- Dip buying mentality
- In The Arora Report analysis, this morning the first leg of the short squeeze appears to be over. This is removing buying pressure resulting in stocks drifting lower in the early trade.
- 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.
Housing
After a sustained period of weakness, the new data shows housing is picking up. Here are the details of the just released data.
- Housing starts came at 1.5M vs. 1.385M consensus.
- Building permits came at 1.456M vs. 1.450M consensus.
Magnificent Seven Money Flows
In the early trade, money flows are negative in NVDA, Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), 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) 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 ***. 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
Oil is seeing buying on rumors of U.S. Aircraft carriers moving closer to Iran.
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
Interest rates are ticking up, and bonds are ticking down.
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 5715 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 118 points.
Gold futures are at $3043, silver futures are at $34.94, and oil futures are at $68.18.
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.
