By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
New Year Mantra
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:
- On the first day of trading in 2025, the chart shows that the stock market has pulled back close to the breakout line.
- The chart shows the micro resistance zone and the support zone.
- RSI on the chart shows that the stock market is neither overbought nor oversold. It is poised to go either way.
- Wall Street machines are ready to jump on whichever direction the stock market starts moving.
- In the early trade, the momo crowd and meme crowd are buying extremely aggressively.
- At the start of 2025, the sentiment is extremely positive. As we have been sharing with you, extreme positive sentiment is a contrary signal. In plain English, it means sell. Keep in mind, sentiment is not a precise timing indicator. Further, sentiment is only one of many indicators. Prudent investors should follow a 360 degree analysis from a proven system such as the adaptive ZYX Allocation Model with inputs in ten categories.
- The last time sentiment was this positive at the start of a new year was in 2000. In 2000, after five years of internet frenzy, the market crashed. Those who were primarily invested in speculative stocks lost 90% – 95% of the value of their portfolios.
- As the market enters 2025, the AI frenzy has been going for only two years versus five years of internet frenzy before the market crashed in 2000.
- With extreme hopium, here is the mantra the stock market is following for 2025:
- Trump will fix everything. At The Arora Report, we would like nothing more than to see Trump succeed. However, the market may face a rude awakening when hopium meets reality.
- As a Magic 8 Ball solution, the market believes bitcoin is the solution to budget deficits, $36T of national debt, and maintaining the dollar as the world’s reserve currency. Trump is apparently planning a one million bitcoin U.S. strategic reserve. The biggest U.S. based bitcoin whale is advocating for a six to seven million bitcoin reserve. In The Arora Report analysis, while it is not impossible for bitcoin to fix these issues, the probability of it working out the way bitcoin bulls are promoting is low. There will be many significant adverse consequences that everyone is turning a blind eye to. For those who want next level information, listen to the podcast titled “OUT OF THIS WORLD BITCOIN PLAN EMERGES.”
- The stock market is believing that the AI frenzy will continue for a third year, taking the stock market to new highs. As you may recall, The Arora Report was one of the very first, if not the first, to say with conviction that AI was real and a fortune is to be made in AI all the way to 2030. In The Arora Report analysis, AI will become smarter and more pervasive in 2025, leading to large productivity gains. However, AI will also be disruptive. Even though the stock market thinks there will only be winners from AI, the reality is there will also be many losers. Further in The Arora Report analysis, money will flow out of some of the present day AI favorites to more software companies and other companies that are users of AI.
- Quantum computing is the latest buzz word that is spreading like wildfire. In The Arora Report analysis, quantum computing has the potential to be bigger than the internet and AI. The emphasis here is on the word “potential.” Further in The Arora Report analysis, know-nothing pumpers are in fantasy land regarding quantum computing. Although there are significant advances in the science, reality is nowhere near the fantasy that is spreading like wildfire. Expect many in the momo crowd to become bag holders. For those wanting next level information, we are preparing a multipart podcast series on quantum computing. The podcast will be in Arora Ambassador Club.
- The stock market is hoping that the Fed will continue to cut rates under pressure from Trump even when the data may not support rate cuts. In The Arora Report analysis, in 2018 in the face of opposition from Trump, Powell did not have the spine to continue with rate cuts and he reversed. Market hopium regarding the Fed may work, unless inflation heats up. In The Arora Report analysis, there is better than 50% probability of inflation heating up depending upon how Trump executes his policies.
- Initial jobless claims came at 211K vs. 224K consensus. This indicates that the jobs picture remains strong, especially at the low end. If the data continues this strong, the Fed will have difficulty cutting rates further.
- As of this writing, some of the extreme optimism from early this morning is dissipating on the data that Tesla (TSLA) deliveries came at 495K vs. 504K consensus. TSLA stock has been a major gainer after Trump’s re-election. TSLA is in the ZYX Buy Core Model Portfolio.
- 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.
Europe
After 57 years, Russian gas has stopped flowing to Europe through Ukraine. Natural gas prices are rising. Two beneficiaries of rising natural gas prices in the ZYX Buy Core Model Portfolio are SHEL and EOG. Other stocks benefiting from rising natural gas prices are EXE, EQT, and RRC – these stocks are in the portfolio that surrounds the Model Portfolio in ZYX Buy. Natural gas stock DVN is in the January Effect list.
China
Chinese stocks have started the new year on a sour note on concerns about Trump tariffs.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and TSLA,
In the early trade, money flows are negative in 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.
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 down, and bonds are ticking up.
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 5977 as of this writing. S&P 500 futures resistance levels are 6017, 6131, and 6256: support levels are 5926, 5748, and 5622.
DJIA futures are up 248 points.
Gold futures are at $2657, silver futures are at $29.70, and oil futures are at $72.85.
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.
