By Nigam Arora
To gain an edge, this is what you need to know today.
Oil Surge
Please click here for a chart of oil ETF (USO).
Note the following:
- The chart shows USO is approaching zone 1 (resistance).
- The chart shows oil was previously in zone 1 when there was peak Iran fear.
- RSI on the chart shows oil is very overbought.
- Prudent investors should make a note that Iran fear has faded away but oil is now close to where it was during peak Iran fear. The predictive power of this simple observation is that the likelihood of oil breaking above zone 1 is fairly high.
- Especially impacting the markets this morning is that Brent crude is crossing $100. $100 for Brent is an important psychological mark. Brent is the international standard for oil.
- The immediate trigger for the move in oil is the U.S. destroying four tankers belonging to Iran as a response to Iran’s attempt to attack U.S. warships.
- Rising oil is raising inflation concerns. Yields are rising. Prudent investors should note that later today the U.S. Treasury will announce the size of the long term bond buyback tomorrow.
- The yen is rising. In The Arora Report analysis of the data, some funds are beginning to unwind the carry trade due to rising yen. In the carry trade, funds have borrowed hundreds of billions of dollars in Japan to invest in the U.S., lately in the AI trade.
- Prudent investors should keep a careful eye on the carry trade unwind as it can bring significant selling in stocks if it continues. An easy way to do so is to watch the yen. As a reference, USD.JPY is trading at 153.46 as of this writing. As late as July 27, traders were aggressively selling yen, causing USD.JPY to reach 163.95. Since then, the yen has been rising as Treasury Secretary Bessent has shown significant support for the yen.
- In The Arora Report analysis, the U.S. has a good reason to support the yen. If the U.S. was not willing to support the yen, the Bank of Japan (BOJ) would have sold the U.S. Treasuries it holds to raise dollars to intervene in the market. At this time of rising Treasury yields, the last thing the U.S. needs is the BOJ selling U.S. Treasuries.
- Apple (AAPL) is very important because investors have been hiding in AAPL stock. Under new CEO Jon Ternus, Apple is expected to launch its $2000 foldable iPhone today. Apple is years behind Samsung (SSNLF) on foldable phones. How well the foldable iPhone sells will be important for Apple and, in turn, the stock market.
- Producer Price Index (PPI) will be released tomorrow at 8:30am ET.
- 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
Most portfolios are now heavily concentrated in the Mag 7 stocks. For this reason, to get ahead and get an edge, investors need to dig below the surface of the Mag 7 stocks. It is equally important to rise above the noise of daily news on the Mag 7 stocks. The best way to get an edge, dig below the surface, and rise above the noise of the daily news is to pay attention to early money flows in the Mag 7 stocks on a daily basis. When there is significant news in the Mag 7 stocks that rises above the threshold of noise and impacts your entire portfolio, it is covered in the main section above.
In the early trade, money flows are positive in Meta (META).
In the early trade, money flows are neutral in Microsoft (MSFT).
In the early trade, money flows are negative in Amazon (AMZN), Nvidia (NVDA), Alphabet (GOOG), 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. 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 ***. 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 gold in the early trade. This is reflected in gold ETF (GLD), silver ETF (SLV), gold miner ETF (GDX), and silver miner ETF (SIL). 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
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 7647 as of this writing. S&P 500 futures resistance levels are 7700, 7831, and 7900 : support levels are 7318, 7194, and 7032.
DJIA futures are down 399 points.
Gold futures are at $4404, silver futures are at $66.69, and oil futures are at $95.90.
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.
