By Nigam Arora
To gain an edge, this is what you need to know today.
Danger Zone For Stocks
Please click here for a chart of 20+ year Treasury bond ETF (TLT).
Note the following:
- The chart shows TLT has fallen into zone 4 (support).
- The chart shows the new danger zone for stocks.
- The FOMC minutes show widespread support for a rate hike. President Trump appointed Warsh as Fed Chair to lower interest rates, but Warsh cannot do it alone. He needs the support of the FOMC.
- Based on the current data, in The Arora Report analysis, there is a 60% probability of a rate hike in 2026. Of course, the probability will decrease if the Iran conflict is resolved quickly.
- What is happening in the bond market is a major reason, along with the upcoming midterm elections, for President Trump to resolve the Iran conflict quickly.
- President Trump is running into two conflicting redlines regarding Iran’s uranium.
- Iran’s Supreme Leader is reportedly saying that Iran’s enriched uranium must stay in Iran. He believes the removal of enriched uranium will increase the likelihood of another attack on Iran. This is not confirmed.
- In contrast, Israel’s redline is that enriched uranium must be removed from Iran. Israel believes if enriched uranium stays in Iran, Iran will pose an existential threat to Israel in the future.
- After great earnings from Nvidia (NVDA), the semiconductor mania was progressing in the early trade, but the buying has been stopped in its tracks by the alleged statement from Iran’s Supreme Leader.
- Iran’s Supreme Leader’s alleged statement is causing oil to rise and bonds to fall. As of this writing in the premarket, there are unconfirmed reports that the White House is claiming the report of Iran’s Supreme Leader’s statement is false.
- Samsung (SSNLF) workers are no longer going on strike. This is good news for memory supply as Samsung is the largest memory maker in the world. Good news for memory supply is bad news for memory and disk drive stocks such as Micron (MU), Sandisk (SNDK), Western Digital (WDC), and Seagate (STX). To counter, these companies are making a case for long term rising demand. Prudent investors should note that memory stocks rose on the potential of the Samsung strike and then rose again on the Samsung strike resolution. To the uninitiated, this does not seem logical. However, this is exactly how bull markets work. The momo crowd buys on good news and bad news.
- The U.S. is investing $2B in nine quantum computing companies. The companies receiving funds include International Business Machines (IBM), Global Foundries (GFS), Rigetti Computing (RGTI), D-Wave Quantum (QBTS), and Infleqtion (INFQ). Quantum computing stocks are jumping.
- Walmart (WMT) is the largest retailer. For this reason, Walmart earnings matter. Walmart earnings are below whisper numbers. Walmart beat revenues but is issuing soft guidance. Tax refunds helped, but the consumer is still getting hurt by higher gas prices. WMT is in the ZYX Buy Core Model Portfolio, long from an average of $19.25. WMT stock is trading at $127.13 as of this writing in the premarket, representing a gain of 560%.
- Initial jobless claims came at 209K vs. 210K consensus.
- 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.
Housing Starts
Housing starts are staying strong in spite of rising rates.
Housing starts came at 1.465M vs. 1.42M consensus.
Building permits came at 1.442M vs. 1.38M consensus.
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 Tesla (TSLA).
In the early trade, money flows are neutral in Apple (AAPL).
In the early trade, money flows are negative in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), and Meta (META).
In the early trade, money flows are mixed 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) in 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
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 *** in 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 up, and bonds are ticking down.
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 7427 as of this writing. S&P 500 futures resistance levels are 7500, 7700, and 7900 : support levels are 7200, 7000, 6780.
DJIA futures are down 139 points.
Gold futures are at $4516, silver futures are at $75.37, and oil futures are at $100.75.
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.
