By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Silver And Dollar Contradiction
Please click here for a chart of silver ETF (SLV).
Note the following:
- The chart is a monthly chart to give you a long term picture.
- The chart shows that silver has broken out from a long base.
- The chart shows an Arora signal for a trade around position. A trade around position is a billionaire and hedge fund technique that can dramatically increase profits and reduce risks.
- The chart shows that the prior resistance zone has now become the support zone.
- The chart shows the trader magnet. Note the price of the trader magnet. This indicates that if the momentum builds, there may be very large gains ahead.
- The chart shows that the trader magnet is exactly the point where The Arora Report gave a sell signal in 2011.
- In one of the most remarkable calls in the history of silver, the Arora call to sell silver came exactly on the same day that silver topped. At that time, almost everyone was extremely bullish on silver and analysts were giving a target of $100. The Arora call was an extreme contrary call that was later proven spot on. More remarkable was the Arora call to short sell silver on the same day that silver topped with a target of a 33% drop in a matter of weeks. That call was also proven spot on.
- The chart shows that the silver rally in 2020 failed. The reason the rally failed was that it was driven almost entirely by two factors:
- Meme crowd
- Short squeeze
- In The Arora Report analysis, there is a fair probability of another short squeeze and another meme crowd run.
- The chart shows The Arora Report call to backup the truck and buy silver just before silver took off in 2011. The Arora backup the truck and buy signal was given when silver futures were in the $17 range. Silver futures quickly shot up to $50 when the sell signal was given.
- Buy zones change. The chart shows one of the more recent silver buy zones.
- Demand for the dollar is surging on the prospect of Trump being elected. In The Arora Report analysis, there is an important contradiction. Silver is priced in dollars. Normally, when the dollar demand goes up, the price of silver falls. Recently, the price of silver has been rising along with demand for the dollar – this is defying common sense. The reason is that the momo crowd is so drunk on the momentum and the breakout that they are oblivious to the macro that impacts silver. It is important that investors do a 360 degree analysis, and not just rely on momentum.
- In The Arora Report analysis, there is a good probability of selling coming into silver right around here.
- Ten year Treasury yield has reached 4.24% as of this writing in the premarket. As we wrote yesterday, when the yield crosses 4.25%, it will start catching smart money’s attention. This is exactly what is happening today, and it is bringing selling into the stock market.
- Prudent investors should note that 1995 was the last time yields rose after the Fed cut interest rates. At that time, Alan Greenspan was the Fed chair. There are parallels to what is happening now.
- Investors should also note that yesterday, volume in the stock market was very low. This indicates a lack of conviction in stocks running up from here even though the talk is that S&P 500 is about to hit 6000. It is more important for investors to pay attention to the walk, not the talk. It is common for large investors to pump up the stock market in the media only to sell their positions into the strength.
- 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.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Microsoft (MSFT).
In the early trade, money flows are neutral in Alphabet (GOOG) and Meta (META).
In the early trade, money flows are negative in Apple (AAPL), Amazon (AMZN), Nvidia (NVDA), 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 *** stocks 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
API crude inventories came at a build of 1.643M barrels vs. a consensus of a build of 0.7M barrels.
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 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 5871 as of this writing. S&P 500 futures resistance levels are 5926 and 6017: support levels are 5748. 5622, and 5500.
DJIA futures are down 264 points.
Gold futures are at $2752, silver futures are at $34.33, and oil futures are at $71.02.
Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding *** in cash or Treasury bills 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.