By Nigam Arora
To gain an edge, this is what you need to know today.
Wild Stock Moves Ahead
Please click here for a chart of leveraged semiconductor ETF (SOXL).
Note the following:
- Semiconductors are the leading sector that drove the stock market higher. SOXL is the momo crowd’s favorite semiconductor ETF.
- The chart shows SOXL rallied to the bottom band of zone 2 (resistance) but was not able to sustain the rally to get to the top band of zone 2. This is a negative.
- The chart shows that SOXL has pulled back to the top band of zone 3 (support).
- RSI on the chart shows that SOXL is approaching an oversold level and thus could bounce.
- The chart shows that this morning there is selling in semiconductors. Semiconductors are being sold this morning in the U.S. in sympathy with Samsung’s stock (SSNLF) crash in South Korea. Samsung stock in South Korea fell 8.7% overnight for the following reasons:
- The selloff was a classic ‘sell the news’ reaction. We previously shared with you that Samsung stock had rallied in anticipation of a shareholder return plan.
- There was disappointment in the structure of the Samsung plan. Samsung’s plan has an unprecedented 90T – 100T won for shareholder payout that investors like, but investors did not like that there was not an immediate, aggressive share buyback or a timeline for Treasury stock cancellations.
- Prudent investors should note that when foreigners sold Samsung stock in South Korea overnight, South Korean retail traders took advantage of the dip and bought Samsung stock.
- Stock market investors should keep in mind that more important than Samsung price action is Nvidia (NVDA) earnings that will be released Wednesday after the close.
- Not as important as Nvidia, but still fairly important to the stock market are Marvell (MRVL) earnings that will be released Thursday after the close. In The Arora Report analysis, Marvell earnings will be an important data point for the next phase of AI.
- Trade talks between the U.S. and Canada are breaking down. Canada is suspending negotiations, and beginning at midnight tonight, the U.S. will impose a 50% tariff on $28B in goods. The Canadian government is planning to match the tariffs to insulate its businesses and people from the effects of U.S. tariffs.
- Prudent investors should pay attention that Anthropic’s Fable 5 has weaker demand than anticipated. In The Arora Report analysis, if this continues, this is a big risk for the AI trade even though the crowd is oblivious at this time.
- NYSE and Nasdaq are planning 23 hours a day stock trading starting December 6. This will be very lucrative for the exchanges and Wall Street as they will be able to attract foreign investors, especially from Asia. In The Arora Report analysis, for most investors, 23 hour trading will increase the risk. The reason is that there will be low liquidity. Due to low liquidity, stocks can have wild moves, especially in response to news. The following regular trading session will likely be significantly impacted by overnight violent moves. We are already witnessing wild moves in U.S. stocks in the early trade based on what happens in South Korea overnight. Now imagine wild moves overnight at NYSE and Nasdaq. Prudent investors should prepare in advance and strengthen their knowledge of risk controls. The Arora Report offers multiple layers of risk control. It is worthwhile for most investors to revisit the Trade Management Guidelines. For those who want next level knowledge, there is a new podcast series in Arora Ambassador Club titled “BRUTAL MATH: WHY SMART MONEY USES 11 LAYERS OF RISK CONTROL.”
- On the positive side for the markets today, yields are pulling back. The reason is the Treasury could use its $1T general account, Treasury’s rainy day fund equivalent, for bond buybacks. We previously shared with you that after the initial euphoria on the Treasury’s buyback announcement, the move was faded by smart money. The reason was that the amount of the buybacks was not significant and there was concern that Treasury Secretary Bessent did not have enough fire power. In The Arora Report analysis, if the Treasury is willing to use the general account fund for bond buybacks, the Treasury has enormous firepower to direct the markets.
- In The Arora Report analysis, the harder the Treasury tries to deal with the adverse effect of the $40T national debt without reducing the deficit, the more investors are convinced that the Treasury is trying to debase the dollar and are rushing into gold and bitcoin. In the long run, this is a big risk for the U.S. stock market that is generally not appreciated by the crowd at this time. Prudent investors should get ahead of the curve and be very mindful of this risk. The easiest way to deal with this risk is to follow the Arora Protection Band.
- Bessent is saying that an “economic D-Day” is coming for Iran. In The Arora Report analysis, prudent investors should get ahead of the risk here that Iran could respond with more attacks on ships or Gulf countries. Again, the best way to manage the risk is to follow the Arora Protection Band.
- In The Arora Report analysis, while investors need to be mindful of the risks, investors should also be open to the tremendous opportunities that the next phase of AI and other innovations will bring to investors.
- 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.
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 Apple (AAPL) and Nvidia (NVDA).
In the early trade, money flows are neutral in Amazon (AMZN), Meta (META), and Microsoft (MSFT).
In the early trade, money flows are negative in Alphabet (GOOG) 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) 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 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 7677 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 65 points.
Gold futures are at $4686, silver futures are at $85.54, and oil futures are at $69.22.
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.
