By Nigam Arora
To gain an edge, this is what you need to know today.
Weak Under Surface
Please click here for a chart of Micron stock (MU).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of MU stock is being used to illustrate the point.
- Micron is important because it is the poster child for the current semi and options manias.
- The chart shows MU stock is approaching the magnet we previously provided to members of The Arora Report in advance.
- RSI on the chart shows there is more room for MU stock to run.
- Volume on the chart is higher on yesterday’s 19% one day rally.
- From the market mechanics side, the big reason for the MU explosive rise is a gamma squeeze. As the momo crowd extremely aggressively bought calls on MU and MU approached strike prices, market makers were forced to buy MU stock. All investors can gain a significant edge in the stock market by deeply understanding market mechanics. The best source to learn market mechanics is to listen to the podcasts in Arora Ambassador Club.
- As a member of The Arora Report, you have been ahead of the curve. We have been sharing with you for a long time that semiconductor demand, including memory demand, is going to continue, but it is going to slow down in 2028. Keep in mind, the stock market reacts in advance of the slow down. The slow down may present a great short selling opportunity. Just like an athlete trains for an event, for those interested in capturing this potential opportunity, you need to start practicing short selling now. One of the reasons for the explosive rally in MU stock was a statement from Micron CEO that demand would continue through 2026. Another reason was a Wall Street analyst setting a target of $1625 for MU.
- Members of The Arora Report are long MU from an average of $21.77, representing a gain of over 4372% as of this writing. The Arora Report was giving signals to buy MU stock when everyone hated Micron. It is not just buying ahead of the crowd. What created such a massive gain was the discipline and framework of The Arora Report to continue holding through volatility while systematically taking partial profits, managing risk, and adapting to changing market conditions.
- Micron’s valuation has now topped $1T.
- In addition to the ongoing semiconductor and options manias, a new mania is in full swing. The new mania is a space mania. The space mania was triggered by the upcoming SpaceX (SPCX) IPO. The Arora Report has given several profitable signals on space positions, including Space Innovators ETF (NASA), Intuitive Machines (LUNR), and Sidus Space (SIDU).
- S&P 500 level of 8000 has become the new magnet. However, prudent investors should note there is weakness below the surface.
- Only 54% of S&P 500 are in an uptrend.
- Over the last month, the only sector to outperform the index is the tech sector.
- There is buying coming in for the umpteenth time on Iran peace hopium. Oil is falling. ZYX Short has a short position in oil ETF USO. In general, a short position works better than an inverse ETF position.
- There is extremely aggressive buying in the early trade, but the mania stocks are very overbought and thus vulnerable to a major pullback anytime. In The Arora Report analysis, a pullback in mania stocks can cause the entire stock market to pull back.
- 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 Nvidia (NVDA) and Tesla (TSLA).
In the early trade, money flows are neutral in Amazon (AMZN) and Apple (AAPL).
In the early trade, money flows are negative in Microsoft (MSFT), Alphabet (GOOG), and Meta (META).
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 *** into the strength 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 range bound.
Markets
Interest rates are ticking down, and bonds are ticking up.
The dollar is weaker.
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 7561 as of this writing. S&P 500 futures resistance levels are 8000, 7700, and 7900 : support levels are 7500, 7200, 7000.
DJIA futures are up 92 points.
Gold futures are at $4449, silver futures are at $74.85, and oil futures are at $88.45.
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.
