By Nigam Arora
To gain an edge, this is what you need to know today.
Rate Cut Hopes Win Out
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- The chart shows the stock market drop on Friday on tensions heating up between the U.S. and China and TACO (Trump Always Chickens Out) traders running the stock market back up Monday morning.
- The chart shows Fed Chair Powell’s speech yesterday driving the stock market higher. Fed Chair Powell’s speech indicated the Fed may cut interest rates at the next FOMC meeting.
- The chart shows the stock market’s reaction to President Trump’s post on soybeans and cooking oil.
- The chart shows the prospect of rate cuts overshadowed President Trump showing his next move in the trade war with China. President Trump’s Truth Social post which stated, “We are considering terminating business with China having to do with Cooking Oil, and other elements of Trade, as retribution.” The issue is China is not buying soybeans from the U.S.
- In The Arora Report analysis, President Trump’s threat to China on cooking oil is not going to mean much. China has its eye on replacing the U.S. as the world’s superpower, and as such, China is not going to care about cooking oil. Also due to U.S. tariffs and China cutting tax rebates, the imports of cooking oil have fallen 65% this year prior to President Trump’s latest threat.
- In yesterday’s Morning Capsule, we shared with you:
This morning TACO traders are meeting CAHN (China Always Holds Its Nerve) traders.
- China’s President Xi has seen how the U.S. markets respond to President Trump escalating the trade war and how President Trump responds. The stock market drop on Friday played into President Xi’s plan to hold steady.
- Walmart (WMT), the largest retailer in the U.S., and OpenAI announced a partnership. Consumers will be able to make purchases via an instant checkout in ChatGPT.
- WMT is in the ZYX Buy Core Model Portfolio, long from $19.25. WMT stock is trading at $107.64 as of this writing in the premarket, representing a 459% gain. From a technical perspective, WMT stock has broken out.
- In The Arora Report analysis, Walmart’s move to agentic commerce is a major milestone. Further, the Walmart move is a departure from the traditional practice of large retailers such as Walmart guarding the purchasing data and then profiting from selling the purchasing data and using it to bring in advertisers. Now, it appears OpenAI will get access to Walmart’s purchasing data, giving ChatGPT a leg up over its competitors.
- Among earnings, Bank of America (BAC) and Morgan Stanley (MS) are better than the consensus and whisper numbers.
- The Fed’s Beige Book will be released today at 2pm ET and may be market moving.
- In the early trade, the momo crowd is extremely aggressively buying quantum computing stocks such as Rigetti (RGTI), IonQ (IONQ), and D-Wave Quantum (QBTS), nuclear stocks such as Oklo (OKLO), NuScale Power (SMR), and NANO Nuclear Energy (NNE), and space stocks such as Rocket Lab (RKLB) and AST SpaceMobile (ASTS). After a torrid run, rare earth mineral stocks, including three in the Arora Portfolio MP Materials (MP), USA Rare Earth (USAR), and Critical Metals (CRML), are seeing profit taking in the early trade.
- The U.S. Army is planning to deploy smart modular reactors on its bases.
- 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 Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (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. 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
Gold ETF (GLD) and silver ETF (SLV) were showing signs of exhaustion when Powell’s speech came. Powell’s speech has given a second wind to the gold and silver rally.
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 selling. During the recent rally, a whale appears to have started a new short position in bitcoin.
Markets
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.
S&P 500 futures are trading at 6735 as of this writing. S&P 500 futures resistance levels are 6780, 7000, and 7200 : support levels are 6500, 6256, and 6131.
DJIA futures are up 237 points.
Gold futures are at $4203, silver futures are at $51.39, and oil futures are at $59.18.
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.
