By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Fate Of Nasdaq 100
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows that QQQ is in the resistance zone. As a reference, S&P 500 has broken out, but QQQ has lagged.
- QQQ is dominated by the Magnificent Seven stocks. Five of the Magnificent Seven stocks are reporting earnings this week: Alphabet (GOOG, GOOGL), Amazon (AMZN), Apple (AAPL), Meta (META), and Microsoft (MSFT).
- RSI on the chart shows that it is easy for QQQ to break out. All it needs is a little spark from big tech earnings.
- This is the busiest earnings week. About one half of S&P 500 companies are reporting this week. To date, about 75% of the companies have reported above consensus. This is slightly below the five year average of 77%.
- The stock market is front running the election. The historical pattern is for the stock market to run up after the election. However, since the market has been front running the election this year, the historical pattern may not be as strong or may not even hold this year. Those wanting next level information may want to listen to the podcast titled “Front Running The Election – Money Flows And Sharp Rise In Debt” in Arora Ambassador Club. The podcast is in post production.
- In the early trade this morning, there is aggressive momo crowd buying as the momentum from front running the election continues.
- 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.
Japan
Japan’s ruling party has lost its parliamentary majority.
- The yen is falling against the dollar.
- Long term Japanese government bonds are falling.
- Japanese stocks are rising on a weaker yen because Japan’s economy is export oriented.
In The Arora Report analysis, the drop in yen may force the Bank of Japan’s (BOJ) hand to intervene by buying yen or by raising interest rates. From a long term perspective, the yen is very undervalued.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Tesla (TSLA), Nvidia (NVDA), AMZN, MSFT, GOOG, META, and 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.
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
There are crosscurrents in gold.
- There is selling in gold due to the Israeli attack on Iran. Please see the oil section below.
- There is buying in gold as investors front run the election. Both Harris and Trump are committed to reckless spending. Investors are seeking refuge in gold.
The momo crowd is *** in gold in the early trade. Smart money is *** in the early trade.
For longer-term, please see gold and silver ratings.
Oil
Oil is experiencing the biggest fall in two years. There are three reasons for the fall:
- Israel retaliated by attacking Iran, but Israel did not attack oil installations.
- Israel attacked Russian made air defense systems in Iran. It appears that in many ways Iran is now left defenseless.
- Iran’s supreme leader is leaning towards restraint to de-escalate.
The momo crowd is *** oil in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Buying in bitcoin (BTC.USD) continues on increasing prospects of a Trump win. Trump is the recipient of very large campaign contributions from the crypto industry.
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 5878 as of this writing. S&P 500 futures resistance levels are 5926 and 6017: support levels are 5748, 5622, and 5500.
DJIA futures are up 223 points.
Gold futures are at $2749, silver futures are at $33.84, and oil futures are at $67.17.
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, 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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This post was just published on ZYX Buy Change Alert.
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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.
