By Nigam Arora
To gain an edge, this is what you need to know today.
Leading Indicators
Please click here for a chart of leveraged semiconductor ETF (SOXL).
Note the following:
- Semiconductors are a tell for the entire stock market because semiconductors are the leading sector.
- The chart shows that including the early trade today, the down gap has been filled.
- The pattern on the chart shows that instead of selling on the island reversal, as is usually the case, investors bought the dip in semiconductors.
- The next test will be if semiconductors can break above the recent high shown on the chart. The chart shows the Arora signal to take partial profits on semiconductor ETF (SMH) right at the top. SMH is in the ZYX Allocation Model Portfolio and now has a gain of 6250% as of this writing in the premarket. This extraordinary large gain illustrates the power of the ZYX Change Method to identify trends ahead of Wall Street.
- Buying in semiconductors yesterday after the stock market close was manic. This morning in the early trade, semiconductors have pulled back from yesterday evening’s manic buying.
- The manic buying in semiconductors was triggered after earnings from Alphabet (GOOG, GOOGL), Meta (META), Microsoft (MSFT), and Amazon (AMZN) showed capex increasing to $725B in 2026. As we previously shared with you, the prior estimate was $650B.
- In The Arora Report analysis, after listening to the conference calls, hyperscaler capex in 2027 is likely to go up another 10% – 15%.
- Semiconductors are the primary beneficiaries of higher capex.
- Yesterday, yields rose and bonds fell on Fed Chair Powell’s decision to stay at the Fed. As a member of The Arora Report, you were already ahead of the curve. We previously shared with you that if Powell decides to stay, it will be harder for incoming Fed Chair Warsh to cut interest rates.
- After Powell’s decision to stay, the gap between the 30 year bond yield and the 3 month Treasury bill reached the highest level since July 2022. The implication is that even though Warsh is expected to suppress short term rates, long term rates are higher due to fear of inflation.
- PCE is the Fed’s favorite inflation gauge. Inflation came warmer than expected. Here are the details:
- Headline PCE came at 0.7% vs. 0.6% consensus.
- Core PCE came at 0.3% vs. 0.3% consensus.
- Initial jobless claims came at 189K vs. 217K consensus. This drop is staggering. To understand how staggering it is, consider the last time jobless claims were this low was in September 1969.
- The U.S. economy is 70% consumer based. For this reason, prudent investors pay attention to personal income and personal spending. The data shows the consumer is strong. Here are the details:
- Personal spending came at 0.9% vs. 0.4% consensus.
- Personal income came at 0.6% vs. 0.4% consensus.
- GDP data shows economic growth has slowed compared to expectations. Here are the details:
- Q1 GDP Adv. came at 2.0% vs. 2.1% consensus.
- Q1 Chain Deflator Adv. came at 3.6%% vs. 3.3% consensus.
- In important earnings, Eli Lilly (LLY) reported earnings better than whisper numbers. Eli Lilly is increasing its forecast on optimism about the weight loss pill. LLY is in the ZYX Buy Core Model Portfolio, long from an average of $318.45. LLY is trading at $902.10 as of this writing in the premarket, representing a gain of 183%.
- Apple (AAPL) will report earnings in the after market.
- In the middle of all of this optimism, some pension funds will engage in month end rebalancing. Such rebalancing will cause billions of dollars of stocks to be sold.
- 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.
Japan
Japan threatened to intervene in the forex market, causing the yen to rise. Interest rates in Japan are important because in the carry trade, funds have borrowed billions of dollars in Japan and invested in the U.S., lately in the AI trade.
Europe
Both the European Central Bank and the Bank of England left interest rates unchanged.
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), Alphabet (GOOG), Tesla (TSLA), and Apple (AAPL).
In the early trade, money flows are negative in Meta (META) and Microsoft (MSFT).
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 ***. 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. This is reflected in gold ETF (GLD), silver ETF (SLV), gold miner ETF (GDX), and silver miner ETF (SIL). 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 range bound.
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 7204 as of this writing. S&P 500 futures resistance levels are 7500 and 7700 : support levels are 7200, 7000, and 6780.
DJIA futures are up 308 points.
Gold futures are at $4649, silver futures are at $74.01, and oil futures are at $105.27.
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.
