By Nigam Arora
To gain an edge, this is what you need to know today.
Aggressive Stock Buying
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- The chart shows the stock market was falling rapidly when The Arora Report wrote the FAA was cutting flights and this would put pressure on both sides to reach an agreement and reopen the government.
- The chart shows the Arora call that stocks can rip higher on the prospect of the government reopening. This call was made when stocks were being aggressively sold, as shown on the chart.
- Only a few hours later, the chart shows the stock market turned on rumors that the government would reopen.
- The chart shows the stock market took another leg up on a media report that the government would reopen.
- The chart shows aggressive buying in the stock market in the early trade today on optimism that the government will reopen soon.
- The VUD indicator is the most sensitive measure of net supply and demand in real-time. The orange represents net supply and the green represents net demand. The VUD indicator has turned orange, indicating net supply of stocks. This shows that underneath the euphoric buying there is a net supply of stocks.
- As is often the case, The Arora Report members were ahead of the curve.
- Here is a noteworthy market behavior that is typical of bull markets.
- The stock market did not see selling when the government was initially shut down.
- The stock market is seeing aggressive buying on the prospect of the government opening.
- In a bull market, it is typical for negative news to be ignored and positive news to be bought.
- Sales data from Taiwan Semiconductor (TSM) is important. TSM manufactures Nvidia (NVDA) and Advanced Micro Devices (AMD) chips. The momentum of revenue increases is slowing at TSM. This should concern prudent investors about the AI trade. However, in the euphoria of the government potentially reopening, no one is paying attention this morning. Here are the details:
- October revenue increased 11% month-over-month and 16.9% year-over-year to roughly $11.9B. This is the slowest increase since early 2024.
- TSM raised its revenue growth forecast.
- TSM is maintaining its forecast for capital spending along with expectations of continued robust AI demand.
- There is a contrasting behavior between the stock market and gold this morning. Expectations in the market were that gold would fall when the government reopened. These expectations made sense because gold is bought when uncertainty rises, and the government reopening reduces uncertainty. However, gold is surging. The reason is the government opening means the government will be spending recklessly, adding to the national debt.
- 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 Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), 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. 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 up, and bonds are ticking down.
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 6814 as of this writing. S&P 500 futures resistance levels are 7000 and 7200 : support levels are 6780, 6500, and 6256.
DJIA futures are up 165 points.
Gold futures are at $4104, silver futures are at $49.81, and oil futures are at $60.06.
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.
