By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Fed Independence
Please click here for a chart of the dollar index (DXY).
Note the following:
- The chart also shows gold ETF (GLD), Japanese currency yen ETF (FXY), S&P 500 ETF (SPY), and 20+ year Treasury bond ETF (TLT).
- The chart shows the dollar is falling.
- The falling dollar is leading foreigners to sell bonds. The chart shows bond ETF TLT is falling.
- Falling bonds are leading to a selloff in stocks in the early trade. The chart shows S&P 500 ETF SPY is falling.
- Investors are rushing to buy gold. The chart shows gold ETF GLD is rising.
- The chart shows the Japanese yen is rising as many investors see yen as a safe haven.
- Gold ETF GLD and Japanese yen ETF FXY are in ZYX Allocation Model Portfolios.
- The foregoing chain reaction was triggered by the Director of the National Economic Council Kevin Hassett saying that President Trump is studying how to fire Fed Chair Powell.
- There is a serious legal question regarding the potential firing of Fed Chair Powell.
- At this time, it is very important for investors to understand how decisions are being made in the White House and how the Supreme Court is making decisions when the administration’s actions are challenged. For those who want to understand how decisions are being made with an example of the recent pause on reciprocal tariffs and the Supreme Court’s pause on deporting Venezuelan immigrants under the Alien Enemies Act, listen to the podcast titled “Prepare For Potential Trump-Powell Panic” that will be released shortly in Arora Ambassador Club.
- In The Arora Report analysis, if Powell is fired, this is how the markets will likely react:
- The dollar may go lower.
- Bonds may go lower.
- Gold may go higher.
- Japanese yen may go higher.
- It is unclear how stocks would react. The reaction in the stock market will come down to who wins the battle:
- Foreigners and smart money will likely be the sellers.
- The momo crowd will likely be buying.
- On the positive side, President Trump is working on several trade deals. In The Arora Report analysis, the announcement of trade deals can potentially bring significant buying into the stock market.
- As a member of The Arora Report you were ahead of the curve. In the Interim Capsule on Friday, we wrote:
There is a report that President Trump is privately considering firing Powell and replacing him with Kevin Warsh.
- Prudent investors should pay attention to President Trump’s pain point. As a member of The Arora Report you have been ahead of the curve. On April 10, we shared with you:
In The Arora Report analysis, the foregoing played a role, but the real reason for the tariff reversal was likely the rise in bond yields.
In The Arora Report analysis, yesterday bond yields were getting close to triggering a full blown financial crisis.
- In The Arora Report analysis, the pause in reciprocal tariffs exposed President Trump’s pain point.
- In the Arora Report analysis, prudent investors need to keep an eye on President Trump’s pain point – the pain point is long bond yields spiraling towards 5%.
- There is a high probability that President Trump will act before the pain point is reached.
- If President Trump decides to act, trade deals may cushion a potential drop in the stock market if Powell is fired.
- In The Arora Report analysis, prudent investors should keep in mind there is a wide range of possible outcomes. These outcomes range from a rip roaring rally to the stock market breaking below recent lows shown on the fourth pane on the chart.
- Due to the popularity of Tesla stock (TSLA) with retail investors, moves in TSLA stock impact stock market sentiment. TSLA stock is adding to the negative sentiment in the early trade on a report that TSLA may delay a new affordable Model Y for the U.S.
- Adding to the negative sentiment this morning is a report that Huawei is getting ready to mass ship an AI chip to compete with Nvidia (NVDA). China is depending on Huawei to counter U.S. sanctions on Nvidia chips to China.
- Data on leading indicators will be released at 10am ET and may be market moving. The consensus is -0.4%.
- 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.
- Any buying at this time should be considered tactical and not strategic. Consider using moderation for any buying.
Magnificent Seven Money Flows
In the early trade, money flows are negative in Amazon (AMZN), Nvidia (NVDA), 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. 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
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
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 seeing buying.
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 5251 as of this writing. S&P 500 futures resistance levels are 5400, 5500, and 5622: support levels are 5210, 5020, and 4918.
DJIA futures are down 354 points.
Gold futures are at $3431, silver futures are at $33.08, and oil futures are at $62.26.
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.
