By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Money Flows
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 that in the early morning yesterday the momo crowd was extremely aggressively buying.
- The chart shows selling came in the stock market after the regular session started yesterday.
- In the late afternoon yesterday, the chart shows heavy blind money buying, as is their pattern. Blind money is the money that flows into the stock market on the first two days of the month without any analysis or regard for market conditions.
- More blind money will flow in the stock market this afternoon.
- In the early trade today, the chart shows the momo crowd is buying more.
- The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand. The chart shows the VUD indicator is mixed.
- Not helping the stock market yesterday was difficult news about three of the seven Magnificent Seven stocks:
- We shared with you in yesterday’s Morning Capsule,
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.
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- Apple’s (AAPL) iPhones are on the decline in China. Non-Chinese phone sales in China fell by 47.4% in November, making it the fourth month in a row of year-over-year decline. Apple is attempting to compete with Chinese phones like Huawei and reverse the declining trend with discounts up to $68.50 on the iPhone in China.
- An excellent Google (GOOG, GOOGL) analyst had the guts to say that the punishment for Google in the antitrust case would be severe. A judge previously declared that Google is a monopolist.
- Collectively the Magnificent Seven are down 4% this week. The Magnificent Seven carry such a heavy weight in indexes that for indexes to move higher, AAPL, TSLA, GOOG, Amazon (AMZN), Meta (META), Microsoft (MSFT), and Nvidia (NVDA) have to move higher.
- There are very heavy money inflows in quantum computing stocks, such as IBM, GOOG, HON, QTUM, IONQ, RGTI, QUBT, QBTS, WKEY, ARQQ, and LAES. Those who called AI a scam and missed the entire up move in stocks like NVDA and the rest of the Magnificent Seven are now extremely aggressively buying quantum computing stocks – they do not want to miss out on the next big thing like they missed out on AI. Paradoxically, in The Arora Report analysis, most of these investors are likely to become big bag holders. The problem investors face is that it is extremely difficult to find credible knowledge about investing in quantum computing. The best way to build the knowledge you need is to listen to the upcoming podcast series on quantum computing in the Arora Ambassador Club.
- ISM Manufacturing Index will be released at 10am ET and may be market moving.
- 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.
China
The Chinese yuan broke the key level of 7.3 yuan per dollar. In The Arora Report analysis, the People’s Bank of China is attempting to combat China’s slow economy and the interest rate difference between China and the U.S. However, falling bond yields in China and rising bond yields in the U.S. are making it a losing battle.
Magnificent Seven Money Flows
In the early trade, money flows are positive in AMZN, GOOG, META, MSFT, and NVDA.
In the early trade, money flows are neutral in TSLA.
In the early trade, money flows are negative in 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) bulls were expecting heavy money inflows into bitcoin ETFs on the first day of the new year. The contrary happened – yesterday saw record outflows from popular bitcoin ETF iShares Bitcoin Trust (IBIT).
Markets
Interest rates are ticking down, and bonds are ticking up.
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 5931 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 106 points.
Gold futures are at $2663, silver futures are at $30.30, and oil futures are at $73.55.
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.
