By Nigam Arora & Dr. Natasha Arora

Weekly Digest from The Arora Report is popular among serious investors and money managers because they have found studying insights from the prior week gives them an edge over the coming weeks. Here is the day by day rundown from the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers of The Arora Report. 

Please scroll down for the section ‘Protection Bands and What To Do Now.’

$5 TRILLION WORTH OF QUAD WITCHING, AI LEADING TO REVIVAL OF NUCLEAR POWER

Sep 20, 2024

To gain an edge, this is what you need to know today.

Nuclear Power Revival

Please click here for a chart of Constellation Energy stock (CEG).

Note the following:

• The Morning Capsule is about the big picture, not an individual stock.  The chart of CEG is being used to illustrate the point.
• To feed the power hungry AI data centers, Microsoft (MSFT) is signing a power purchase agreement with CEG.
• The chart shows the gap up on CEG news.
• The chart shows that CEG is in the resistance zone.
• RSI on the chart shows that CEG is very overbought.  An overbought stock tends to pullback.
• Based on the quantitative screen of the ZYX Change Method, CEG is way overvalued at this time.  However, CEG will benefit from AI, and as such, it is on our radar to give a signal when it is appropriate.
• To provide the power, CEG will restart Three Mile Island Unit 1.  This reactor was shut down about five years ago due to economic reasons.  Three Mile Island Unit 2 is famous for a partial melt down, which caused the most serious nuclear accident on U.S. soil.  In addition to CEG, there are opportunities in other energy producers that will help meet the massive power demand for AI.
  • Quanta Services (PWR) is a contractor to electric utilities and is benefiting from the AI power demand.  PWR is in the ZYX Buy Core Model Portfolio. PWR is long from $37.  It is trading at $290.01 as of this writing in the premarket.  This represents a gain of 684%.
  • First Solar (FSLR), which provides solar power to data centers, is in the ZYX Buy Core Model Portfolio.
  • A new name that is on our radar to give a signal when appropriate is Vistra (VST).
• We shared with you yesterday that quad witching was to the upside.
  • A part of the strength in the stock market yesterday was due to quad witching and not due to the Fed’s 50 bps interest rate cut.
  • About $5 trillion notional value of stock derivatives are expiring today.  This is a huge amount but not a record.
  • This morning, expiring futures are exerting downward pressure on the market after yesterday’s runup.  Futures are expiring this morning.
  • Options will expire in the afternoon.
• Historically, gains due to quad witching tend to reverse in the following week and sometimes even on the expiration day.
• 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.

Japan

In a relief to U.S. stock investors, the Bank of Japan (BOJ) left interest rates unchanged.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Alphabet (GOOG).

In the early trade, money flows are neutral in Apple (AAPL), Amazon (AMZN), Meta (META), and MSFT.

In the early trade, money flows are negative in 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.

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 *** in oil in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Trump’s advocacy continues to bring buying into bitcoin (BTC.USD). Here is the key question: Will bitcoin whales take advantage of the strength to sell as is their pattern?

Markets

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.

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.

Gold futures are at $2639, silver futures are at $31.64, and oil futures are at $70.62.

S&P 500 futures are trading at 5762 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 49 points.

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.

QUAD WITCHING TO THE UPSIDE, TRUMP SAYS FED PLAYING POLITICS

Sep 19, 2024

To gain an edge, this is what you need to know today.

Quad Witching

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:

• Quad witching is tomorrow.
• In quadruple witching, stock index futures, futures options, stock options, and single stock futures expire.  Quadruple witching often leads to volatility.
• In The Arora Report analysis, quad witching is to the upside.  As of this writing, the buying is extremely aggressive.
• The chart shows that the stock market has broken above the support/resistance zone.  If the stock market continues to go higher, this zone will become the top support zone.
• RSI on the chart shows that the stock market has quickly become very overbought.
• We wrote yesterday in the Morning Capsule:

A 50 bps cut and highly dovish commentary will be helpful for a Harris election.  The Fed will never admit it, but there is a school of thought that the Fed wants to help Harris win the election.  The reason is that Trump has already said he will not reappoint Powell.  Further, Trump has said that he will interfere with the Fed.

• Here is the reaction from Trump and a Republican Senator:
  • Trump says that the Fed is playing politics.  Trump said, “The economy would be very bad or they’re playing politics, one or the other. But it was a big cut.”
  • Republican Senator Tuberville said, “Proud of Fed Governor Bowman for bucking Jay Powell.  The Fed’s drastic rate cut is shamelessly political.”
    • Fed Governor Michelle Bowman has become the first Fed Governor since 2005 to dissent.   She was in favor of a 25 bps cut.
• IBM (IBM) is reportedly quietly laying off thousands of workers.  The layoffs are apparently being done in secret.  The new trend seems to be to lay off workers secretly.  The trend is especially strong in information technology.  In The Arora Report analysis, the trend is likely to accelerate further as AI takes hold in corporations.
• In The Arora Report analysis, investors should note that long bonds continue to see selling after the Fed rate cut.  Further, in The Arora Report analysis, after the quad witching fever wears off and if bonds do not rally, stock market investors will notice lower bonds.  The result may be the market giving up some of the large gains.  
• Jobless claims came at 219K vs. 232K consensus.  This data is strong.  If this data had come out before the Fed rate cut, the market would have likely gone down as this data does not support the 50 bps cut.  However, now the market is ignoring the data because the Fed has already made its move.
• 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.

England

The Bank of England (BOE) kept its rates unchanged.  The BOE decision is as expected.

Japan

Traders are anxiously awaiting the Bank of Japan (BOJ) decision. There is no clear consensus if BOJ will raise rates.  Due to the carry trade, BOJ’s decision is very important for U.S. investors.

Magnificent Seven Money Flows

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 *** 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.

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

More explosions in Lebanon are bringing buying into oil.  Previously Israel engineered thousands of pagers used by Hezbollah to explode simultaneously.  Now, walkie-talkies used by Hezbollah are also exploding.  Israeli Defense Minister Yoav Gallant said, “We are at the start of a new phase in the war — it requires courage, determination and perseverance.”

In The Arora Report analysis, the concern is that Israel is getting ready to expand the war.  

The momo crowd is *** oil in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Trump paid for a transaction in a bar with bitcoin (BTC.USD).  This, in addition to the Fed rate cut, is bringing buying into bitcoin.

Markets

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.

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.

Gold futures are at $2603, silver futures are at $31.32, and oil futures are at $71.09.

S&P 500 futures are trading at 5767 as of this writing.  S&P 500 futures resistance levels are 5926 and 6017: support levels are 5748, 5622, and 5500.

DJIA futures are up 456 points.

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

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.

FED CREDIBILITY AT STAKE – WALL STREET POSITIONED FOR 50 BPS CUT AND HIGHLY DOVISH COMMENTS

Sep 18, 2024

To gain an edge, this is what you need to know today.

Fed Credibility At Stake

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 that the stock market is near the resistance zone.
• The chart shows that the rally has been on low volume.  This indicates a lack of conviction.
• The chart shows that RSI has just entered the overbought zone.  This indicates that the stock market can go either way.
• The chart shows that if the stock market does not break out and turns down from here, it will be tracing a triple top.  A triple top is a negative pattern.
• FOMC will announce its rate decision at 2pm ET today and will be followed by Powell’s press conference at 2:30pm ET.
• Understanding Wall Street positioning can give investors a big edge.  Wall Street is positioned for a 50 bps cut and highly dovish comments.
• In The Arora Report analysis, the totality of data does not justify a 50 bps cut.  Further in The Arora Report analysis, the totality of data does not justify very dovish commentary. 
• In The Arora Report analysis, if the Fed complies with the momo crowd’s demands, the Fed’s credibility will be hurt in the long run.  There may be unintended consequences.  One unintended consequence may be a rise in long term yields in due course.  The other potential unintended consequence may be an unhealthy drop in the dollar.    
• If the momo crowd gets what they want, S&P 500 at 6000 is a magnet for traders.
• If the momo crowd gets what they want, the momo crowd will aggressively buy.  However, it is not clear how smart money will react.  There is a fair probability of smart money taking advantage of the strength to sell.
• If the Fed cuts by 25 basis points, then the market reaction will depend on commentary and the dot plot.
• In The Arora Report analysis, if the Fed cuts by 25 bps and the commentary is not dovish, there is a downside risk to the stock market. 
• Those who would like next level information, please listen to the podcast titled “A CONTRARIAN CALL ON THE INTEREST RATE CUT CYCLE.”
• Prudent investors need to be very mindful that the Fed is about to cut interest rates at a time when the stock market is near its all time high, house prices are near all time highs, and the economy is strong.  Historically, the Fed cuts interest rates when the economy is weak or in recession, house prices are falling, and the stock market is weak.  By aggressively cutting interest rates now accompanied by highly dovish commentary, the Fed risks its long term credibility.    Highly dovish action now also has the potential to start rampant speculation in stocks, housing, and cryptos.
• A 50 bps cut and highly dovish commentary will be helpful for a Harris election.  The Fed will never admit it, but there is a school of thought that the Fed wants to help Harris win the election.  The reason is that Trump has already said he will not reappoint Powell.  Further, Trump has said that he will interfere with the Fed.
• 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.

Housing Starts

Housing starts came at 1356K vs. 1320K consensus.

Building permits came at 1475K vs. 1415K consensus.

In The Arora Report analysis, activity among builders is increasing as they anticipate falling interest rates will let loose pent up demand.  This will increase economic activity, which in turn is good for the stock market. 

Magnificent Seven Money Flows

In the early trade, money flows are positive in Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Tesla (TSLA).

In the early trade, money flows are neutral in Amazon (AMZN) and Nvidia (NVDA).

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 *** 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.

Gold

In The Arora Report analysis gold has run up in anticipation of a 50 bps cut and highly dovish Fed commentary.  There is a downside risk to gold if the Fed cuts by only 25 bps and the commentary is not highly dovish.  

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 1.96M barrels vs. a consensus of a draw of 0.1M barrels

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 seeing buying in anticipation of a 50 bps rate cut.  Bullish crypto gurus are hopeful that a 50 bps cut will take bitcoin to a new high.

Markets

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.

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.

Gold futures are at $2601, silver futures are at $30.93, and oil futures are at $69.41.

S&P 500 futures are trading at 5707 as of this writing.  S&P 500 futures resistance levels are 5748 and 5926: support levels are 5622, 5500, and 5400.

DJIA futures are up 48 points.

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.

BIGGEST EVER MICROSOFT BUYBACK, NEW RETAIL SALES GO AGAINST PREVAILING WISDOM, TRUMP CRYPTO PROJECT

Sep 17, 2024

To gain an edge, this is what you need to know today.

Against Prevailing Wisdom

Please click here for a chart of Microsoft stock (MSFT).

Note the following:

• The Morning Capsule is about the big picture, not an individual stock.  The chart of MSFT stock is being used to illustrate the point.
• The chart shows that after touching the low band of the support zone, MSFT stock has moved up in a straight line.
• The chart shows the move up in the early trade on three announcements:
  • Microsoft is announcing a new $60B stock buyback program.  This matches the largest buyback program ever from Microsoft.
  • Microsoft is increasing the dividend by 10%.
  • Microsoft is introducing more AI features in Office 365 and a new collaborative tool named Copilot Pages.  This new tool allows users to collaborate and edit data taken from Copilot on a single page. The company is also introducing a new agent builder allowing users to build AI powered agents.
• Microsoft is in the ZYX Buy Core Model Portfolio.  The Arora Report has just issued a new buy zone.
• Investors are seeing the news from Amazon (AMZN) as return to normalcy after the pandemic – Amazon will require workers to be at the office five days a week.
• The stock market is running as Wall Street positions for a 50 bps rate cut.  50 bps rate cut has now become the prevailing wisdom.
• Prudent investors closely watch retail sales data as the U.S. economy is 70% consumer based.  In The Arora Report analysis, the data just released is very important because it is the last piece of economic data that the FOMC is going to see before making its rate decision tomorrow.  In The Arora Report analysis, the just released retail sales data does not support a 50 bps cut.  Here is the latest retail sales data.
  • Headline retail sales came at 0.1% vs. -0.2% consensus.
  • Retail sales ex-auto came at 0.1% vs. 0.2% consensus.
  • Prior retail sales were revised to 1.1% from 1.0%.
• 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 AMZN, MSFT, Alphabet (GOOG), Meta (META), Nvidia (NVDA), and Tesla (TSLA).

In the early trade, money flows are negative in 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 *** 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.

Gold

The momo crowd is *** in 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 *** in oil in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Trump has released details of his crypto project.  The project is called World Liberty Financial.  63% of the coins will be bought by the public, 20% will be owned by the founding team, and 17% will be for user rewards.

The release of Trump’s crypto project details is bringing in buying in all cryptos, including bitcoin (BTC.USD).

Markets

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.

Interest rates and bonds are range bound.

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.

Gold futures are at $2602, silver futures are at $31.10, and oil futures are at $70.22.

S&P 500 futures are trading at 5724 as of this writing.  S&P 500 futures resistance levels are 5748 and 5926: support levels are 5622, 5500, and 5400.

DJIA futures are up 125 points.

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.

SILVER IS THE NEW AI PLAY – TRADER MAGNET IS MUCH HIGHER, FED WEEK

Sep 16, 2024

To gain an edge, this is what you need to know today.

Silver Is The New AI Play

Please click here for a chart of silver ETF (SLV).

Note the following:

• The chart is a monthly chart to give you the long term perspective.
• In The Arora Report analysis, silver has the potential to become an AI play.  
  • Silver is extensively used in electronics that go into AI data centers.
  • AI data centers are power hungry.  Some data centers are being built next to huge solar farms.  Silver is used in solar cells.  First Solar (FSLR) is the leader in utility scale solar farms.  First Solar is in the ZYX Buy Core Model Portfolio.
• Silver also moves with gold.  We have previously shared with you that gold has hit a new high.
• The chart shows that silver is far from a new high.
• The chart shows the resistance zone.  If the resistance zone is broken, silver can go much higher.
• The chart shows the trader magnet for silver.
• RSI on the chart shows that silver is overbought.  Overbought commodities tend to pullback.
• In The Arora Report analysis, Wall Street positioning in silver is very low.  This can lead to an explosive up move once the move starts going.  Positioning is an important Wall Street mechanic.  Investors who learn Wall Street mechanics gain important edges.  It is difficult to learn the nuances of Wall Street mechanics because Wall Street professionals keep these nuances close to the chest due to their very high value.  The best way to learn Wall Street mechanics is to listen to the podcasts in Arora Ambassador Club.  To join the waitlist, please click here to fill out the form.
• The move in silver will come down to three factors:
  • If the Fed lowers rates by 25 bps or 50 bps
  • How gold reacts to the Fed
  • Does a short squeeze start in silver?  In The Arora Report analysis, silver is prone to short squeezes.  
• The move in silver in 2021 was the result of silver becoming a meme crowd favorite and the resulting short squeeze.
• The Arora Report record on silver is unrivaled.
  • The chart shows that The Arora Report gave a back up the truck and buy silver signal when silver was in the $17 range. The Arora Report gave a sell signal on silver hours before silver peaked.  The chart shows that was one of the most remarkable calls ever made.
  • Not only that, right at the peak around $50, The Arora Report gave a signal to short sell signal and gave a target for silver to fall to $34 in a matter of weeks.  The chart shows that was another highly remarkable, spot on call.
• The Arora Report gold and silver ratings are used across the globe by individual investors, hedge funds, institutions, bullion dealers, and jewelers.  You can access these ratings from the top menu.
• Silver ETF SLV is in ZYX Buy Core Model Portfolio.  There will be a new post with a new buy zone.
• Last week a big weekly reversal occurred in S&P 500.  Last week was one of the best weeks.  The prior week was one of the worst weeks.  Since 1957, there have been 10 such reversals when the stock market was near a high.  S&P 500 has been higher an average of 5.2% over the next three months 90% of the time.
• Apple stock (AAPL) is falling today after Ming-Chi Kuo said that demand for the iPhone 16 is lower than expected.  In the past, analysis from Ming-Chi Kuo has almost always proven spot on.
• This is a Fed week.  FOMC will announce its decision at 2pm ET on Wednesday.
• In the early trade, the momo crowd is buying, but some selling is coming in tech stocks on Ming-Chi Kuo’s report.
• 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 neutral in Meta (META), Amazon (AMZN), and Alphabet (GOOG).

In the early trade, money flows are negative in AAPL, Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA).

In the early trade, money flows are positive in S&P 500 ETF (SPY) and negative in Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

The momo crowd is *** 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.

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 *** oil in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) is seeing light selling.

Markets

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.

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.

Gold futures are at $2612, silver futures are at $31.35, and oil futures are at $70.29.

S&P 500 futures are trading at 5685 as of this writing.  S&P 500 futures resistance levels are 5748 and 5926: support levels are 5622, 5500, and 5400.

DJIA futures are up 98 points.

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.