By Nigam Arora
To gain an edge, this is what you need to know today.
Korea Drops 10%
Please click here for a chart of South Korea ETF (EWY).
Note the following:
- As we have previously shared, prudent investors pay attention to stocks in South Korea because South Korea is like a canary in the coal mine for the AI trade and the semiconductor mania. The reason is that two of the three biggest memory manufacturers, SK Hynix (HXSCL) and Samsung (SSNLF), are South Korea based. The third is Micron (MU). Micron is U.S. based. An easy way to watch the South Korean market is to watch ETF EWY.
- The chart shows South Korea ETF EWY crossed slightly above the low band zone 1 (resistance) the day before yesterday, hitting an all time high.
- Those who trade only based on traditional technical analysis deemed it to be a breakout and aggressively bought Korean stocks.
- The chart shows last night EWY fell about 10%. Now, it is clear that the breakout was false. This illustrates why prudent investors should not use traditional technical analysis alone. Moreover, traditional technical analysis no longer works as well as it used to. Please click here to see the reason. The Arora Report proprietary system synergistically combines the best elements of technical analysis, including new proprietary indicators that work, macro analysis, fundamental analysis, and quantitative analysis.
- The chart shows zone 2 (support). Prudent investors should carefully watch what happens to EWY relative to zone 1 and zone 2, especially after Micron earnings. Micron will report earnings tomorrow after the close. Members of The Arora Report are long MU from an average of $21.77. MU stock closed yesterday at $1211.38, representing a gain of 5464%.
- The chart shows the Arora buy signal for EWY. South Korea ETF (EWY) is long from an average of $48.60 from the April 9, 2025 signal. EWY is in ZYX Emerging. Even after the drop this morning shown on the chart, members of The Arora Report still have a gain of 301%.
- The proximate cause of the sell off in South Korean stocks was an unconfirmed local report that SK Hynix is shifting DRAM capacity from high bandwidth memory (HBM) used in AI data centers in favor of general purpose DRAM. If the report is correct, why would SK Hynix make such a move? In The Arora Report analysis, HBM has significantly higher profit margins. The only reason to make the reported move would be if the demand for HBM is slowing.
- In The Arora Report analysis, prudent investors should take the report from Korea with a grain of salt. The Arora Report analysis has been that the demand for AI semiconductors is going to continue throughout 2026 and will slow in 2027 to 2028. Prudent investors need to keep in mind that markets look ahead 6 – 18 months.
- The drop in South Korean stocks is causing a selloff in semiconductor stocks in the U.S. in the early trade. The momo crowd’s favorite ETF DRAM that represents semiconductor memory is down 12.6%, and the momo crowd’s favorite leveraged semiconductor ETF SOXL is down 19.7% as of this writing in the premarket.
- We have been sharing with you that the risks of a pullback in the stock market are rising. The key question for prudent investors is how to participate in the upside from three manias and simultaneously protect their portfolios. The answer is dynamic hedging. In practice, dynamic hedging can become complex. Fortunately, there is an easy, actionable way to implement dynamic hedging using the Arora Protection Band. As a reference point, the Arora Protection Band was raised on June 17.
- In addition to paying attention to semiconductors, prudent investors should get ahead of the curve and pay attention to quarter end rebalancing. In The Arora Report analysis, institutions will likely be selling over $100B in equities and shifting the money to bonds.
- The premise behind the ZYX Change Method is that investors may generate more alpha by identifying significant changes early. Prudent investors should pay attention to a new change that is just beginning to happen. Until now, the guiding principle in large corporations was token max as they wanted to maximize the use of AI. Now, the trend is shifting to token min. The reason is the rising costs of tokens.
- Prudent inventors should also pay attention to another change along with the shift from token max to token min. The models from Google (GOOG, GOOGL), Anthropic, and OpenAI are very expensive. Corporations are beginning to look at cheaper open source models for some tasks. Further, prudent investors should note there is a flood of cheaper open source models coming from China. In The Arora Report’s preliminary analysis, for certain tasks the cost of using the top U.S. models is eight times the cost of cheap Chinese models.
- On the positive side, the Trump administration is looking at providing low cost loans for nuclear power and also setting up a new initiative to promote quantum computing. On the negative side, SpaceX (SPCX) stock saw aggressive selling yesterday on concerns about valuation and the hype was overdone. Another reason that is adding to the SPCX selloff is SoftBank (SFTBY) CEO Masayoshi Son coming out negative on space data centers. Space data centers are one of the reasons investors got excited about SPCX.
- Adding to the persistent tech layoffs is the news that Oracle (ORCL) is laying off 21,000 workers.
- 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
Prudent investors pay attention to Japan because of the carry trade. In the carry trade, investors have borrowed hundreds of billions of dollars in Japan to invest in the U.S., lately in the AI trade.
The Japanese yen moved up from the lows after Japan’s Finance Minister Katayama and Treasury Secretary Bessent had a phone call.
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 Microsoft (MSFT).
In the early trade, money flows are neutral in Amazon (AMZN).
In the early trade, money flows are negative in Apple (AAPL), Nvidia (NVDA), Alphabet (GOOG), Meta (META), and Tesla (TSLA).
In the early trade, money flows are negative 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 *** 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.
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 7430 as of this writing. S&P 500 futures resistance levels are 7700, 7900, and 8000 : support levels are 7318, 7194, and 7032.
DJIA futures are down 233 points.
Gold futures are at $4127, silver futures are at $61.85, and oil futures are at $73.65.
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.
