By Nigam Arora
To gain an edge, this is what you need to know today.
Buying In Semis
Please click here for a chart of leveraged semiconductor ETF (SOXL).
Note the following:
- Semiconductors are the leading sector that has been driving the stock market higher. SOXL is the momo crowd’s favorite semiconductor ETF.
- The chart shows that the selloff in SOXL yesterday stopped at the low band of zone 2 (support).
- The chart shows that this morning there is aggressive buying in semiconductors, and SOXL is now above the upper band of zone 2.
- Buying in semiconductors is lifting the overall stock market in spite of the second wave of U.S. attacks on Iran and Iran’s counter attacks.
- In The Arora Report analysis, aggressive buying in semiconductors is triggered by the U.S. listing of SK Hynix (HXSCL, SKHY) being 7X oversubscribed. This indicates very heavy demand for the South Korean memory maker. The SK Hynix offering is among the largest for a foreign company in the U.S.
- SK Hynix will start trading in the U.S. tomorrow. How SK Hynix trades will impact the entire semiconductor sector, and in turn, the entire stock market.
- To keep you ahead of the curve, we have been sharing with you that the momo crowd is oblivious to increasing memory capacity that is going to come online. So far, The Arora Report thesis is on track. The news this morning is that Micron (MU) is accelerating, spending more than $250B through 2035 to increase production.
- Of special note, this morning Meta’s (META) stock is being sold on Meta placing its custom AI chip in production in September and Meta’s plan to double its capacity.
- In The Arora Report analysis, prudent investors should note the change in the character of this stock market. If the same news from Meta had come out last month, META stock would have gone up. In the past, when hyperscalers introduced their own chips and increased compute capacity, their stocks have gone up.
- Earnings season will start tomorrow with Delta Air Lines (DAL) reporting earnings. The first important set of earnings from banks, including Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), JPMorgan (JPM), and Wells Fargo (WFC), will be on Tuesday, July 14 before the regular session open. Whisper numbers for bank earnings are running ahead of consensus numbers.
- In The Arora Report analysis, FOMC minutes showed that this is the most divided Fed in decades.
- Initial jobless claims came at 215K vs. 220K consensus. This indicates the jobs picture remains strong.
- Oil rose yesterday after the regular session close on news of a second day of U.S. attacks on Iran. Overnight, oil gave up all its gains in spite of massive Iranian counterattacks.
- In The Arora Report analysis, the reason oil is having a hard time sustaining gains is two-fold:
- The belief among oil traders is that President Trump has an eye on the midterm elections, and as such, President Trump is not likely to escalate beyond limited attacks.
- Iran’s economy is in bad shape. Iran needs to keep selling oil to sustain its economy. As such, Iran is also not likely to escalate beyond limited counter attacks.
- In The Arora Report analysis, to get ahead of the curve, prudent investors should be aware that there is a high probability of a scenario where there is no permanent deal between the U.S. and Iran, and low level warfare becomes the norm.
- 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.
China
China is experiencing deflation. Here are the details:
- June CPI came at -0.3% month-over-month vs. -0.2% consensus.
- June PPI came at -0.3% month-over-month vs. -0.3% 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 Nvidia (NVDA).
In the early trade, money flows are neutral in Tesla (TSLA).
In the early trade, money flows are negative in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Apple (AAPL).
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 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 and bonds are range bound.
The dollar is range bound.
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 7546 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 up 21 points.
Gold futures are at $4121, silver futures are at $59.92, and oil futures are at $73.93.
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.
