WEEKLY STOCK MARKET DIGEST: WHAT PRUDENT INVESTORS NEED TO KNOW NOW

May 23, 2025

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.’

BOND REACTION TO ‘BIG BEAUTIFUL’ TAX BILL GETS IN THE WAY OF STOCK MARKET RALLY, HOLIDAY SCHEDULE

May 21, 2025

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

Bond Reaction

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 after breaking above the breakout line, the stock market is pulling back.
Zone 1 (resistance) shown on the chart is a magnet for stock market bulls.
RSI on the chart shows the stock market is overbought. Overbought markets are susceptible to a pullback.
The momo crowd continues to buy every tiny dip on hopium that the stock market is going to new highs in a matter of days.
Yesterday after hours, stock futures dipped on a report that Israel may be getting ready to attack Iran’s nuclear facilities. The momo crowd aggressively bought the dip.
Earlier this morning, stock futures dipped on rising bond yields. Once again, the momo crowd aggressively bought the dip.
As of this writing, the yield on 10 year Treasuries has risen above the psychologically important level of 4.5% – it is trading at 4.535%. The yield on 30 year Treasuries has risen above the psychologically important level of 5% – it is trading at 5.027% as of this writing.
Rising yields are getting in the way of the stock market rally.
The U.S. Treasury will sell $16B in 20 year bonds today. We will be carefully watching as the results may be market moving. Investors gain an edge when they learn how to interpret Treasury auctions – in view of the rising national debt and deficit this is important. To learn how to properly interpret Treasury auction results, listen to the podcast in Arora Ambassador Club titled “TREASURY AUCTION DATA: IGNORE THE MOST POPULAR.”
Why are Treasury yields rising? The bond market tends to be smarter than the stock market as the stock market is dominated by the momo crowd.
- The bond market is staring at President Trump’s “big beautiful” tax bill and getting concerned that the bill will raise the deficit and national debt.
- In contrast, the stock market momo crowd is looking at the tax bill and aggressively buying stocks as they are excited about tax cuts.
Among notable earnings, earnings from retailer Target (TGT) are below consensus, but earnings from home improvement retailer Lowe’s (LOW) are above consensus.
Investors should ignore DJIA this morning as the drop in DJIA is in part due to the drop in UnitedHealth Group stock (UNH). UnitedHealth is the largest health insurer in the country. UNH stock is dropping on a downgrade and allegations that UnitedHealth secretly paid kickbacks to nursing homes.
On Capitol Hill, negotiations are continuing on the tax bill. The outcome may be market moving. There are differences among GOP lawmakers on details of a tax package. According to the latest analysis by the nonpartisan Congressional Budget Office, the bill will increase resources by 4% for the top 10% of U.S. households and decrease resources by 2% for the bottom 10% of U.S. households.
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.

Honoring Our Brave On Memorial Day

Memorial Day holiday is ahead. Please join us in remembering the brave who sacrificed their lives for us to enjoy the freedoms we have.

Due to the holiday schedule, the next Morning Capsule will be on May 27, and the offices will be on a reduced schedule. Posts other than the capsules will be published as needed.

Magnificent Seven Money Flows

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

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

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 *** 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

Gold has moved up on the threat of a potential Israeli attack on Iran’s nuclear installations.

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

Oil has moved up on the threat of a potential Israeli attack. Due to this threat, the market is ignoring bearish API data.

API crude inventories came at a build of 2.499M barrels vs. a consensus of a draw of 1.85M 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 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 5919 as of this writing. S&P 500 futures resistance levels are 6017, 6131, and 6256 : support levels are 5926, 5748, and 5622.

DJIA futures are down 388 points.

Gold futures are at $3307, silver futures are at $33.34, and oil futures are at $63.00.

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.

MICROSOFT AI AGENTIC VISION – AI AGENTS WILL CHANGE EVERY COMPANY – A STOCK MARKET TELL

May 20, 2025

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

A Stock Market Tell

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 is being used to illustrate the point.
The chart shows that MSFT stock is in zone 1 (resistance).
MSFT stock is a tell for the entire market at this time. If MSFT stock breaks above the top band of zone 1 shown on the chart, it will be an indicator that the entire stock market is likely going higher. If MSFT stock pulls back below the low band of zone 1 shown on the chart, it will be an indicator that the entire stock market is likely to pull back.
RSI on the chart shows that MSFT stock is very overbought at this time.
The chart shows the Arora buy signal on MSFT stock near the recent lows. Near the recent lows MSFT was identified by The Arora Report as one of the top nine stocks to buy.
MSFT stock is in the ZYX Buy Core Model Portfolio. Long time members of The Arora Report have very large unrealized gains on MSFT.
The chart shows that members who joined The Arora Report later have had several opportunities to buy MSFT stock at attractive prices when it dipped in the buy zones.
The Arora Report was one of the first, back in 2022, to share with members with utmost conviction that AI was real and a fortune was to be made in AI all the way to 2030. Lately, we have been sharing with you the importance of investing in software for AI. Microsoft is the most important software company to invest in for AI. It is worth repeating The Arora Report’s prior call that, in due course, AI agents will reshape every company and the economy.
At its annual developer conference Microsoft Build, CEO Satya Nadella shared details of how Microsoft is building an open agentic web in which AI agents work together to make decisions and perform tasks for companies as well as individuals. Microsoft is reshaping its entire stack. Microsoft announced a number of product updates for the agentic web.
Investors need to be careful as some of the present day software giants will be decimated by the spread of AI agents. The reason is that the software of these companies was not built for AI. Therefore, investors need to be very discriminating in how they invest in software stocks for AI. An example of a native AI software stock is Palantir (PLTR). PLTR is also in the ZYX Buy Core Model Portfolio, and members have large unrealized gains.
President Trump is on Capitol Hill to persuade lawmakers to pass his “big beautiful bill.” Stock market bulls are excited as they believe tax cuts in the bill will trigger a tsunami of stock buying, leading stocks to new highs. In The Arora Report analysis, the proposed bill is pro-growth, but it will increase the deficit and the national debt. The proposed bill will also hit lower income individuals who depend on government safety nets.
For the time being, investors are not concerned about national debt or high budget deficit.
- This was evident in the extremely aggressive buying in the stock market yesterday on Moody’s downgrading U.S. debt.
- There is a distinct chasm developing in the thinking of retail investors and institutions. Most of the stock market rise from the lows yesterday on the U.S. debt downgrade was driven by retail investors, not institutions.
Of importance this morning are earnings from Home Depot (HD). The reason Home Depot earnings are important is because Home Depot is the largest retailer of goods for home improvement. Home Depot reported earnings of $3.56 vs. $3.59 consensus and revenue of $39.86B vs. $39.25B consensus. For FY25, Home Depot sees earnings down 2%. In the early trade, investors are buying HD stock, driven primarily by bullish sentiment to buy anything that has news – good or bad.
In the middle of all of the bullishness, investors need to keep in mind the proprietary Arora Sentiment Indicator is in the extreme positive zone. When sentiment is at the extreme positive, it is a contrary signal. It is worth reminding that sentiment is not a precise timing indicator.
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

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

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

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

Very Very Short-Term Indicator

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 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.

S&P 500 futures are trading at 5969 as of this writing. S&P 500 futures resistance levels are 6017, 6131, and 6256: support levels are 5926, 5748, and 5622.

DJIA futures are down 5 points.

Gold futures are at $3238, silver futures are at $32.62, and oil futures are at $62.20.

14 YEARS TOO LATE – U.S. DOWNGRADE PUSHES LONG BORROWING COSTS OVER 5%, MOMO BUYING THE DIP

May 19, 2025

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

Take More Partial Profits On Tactical Trades

Consider continuing to take partial profits on tactical trades that were initiated near the April lows.

Out of an abundance of caution, The Arora Protection Band is being raised. Please see the section below and the separate post on hedges.

U.S. Downgraded

Please click here for a chart of 20+ year Treasury bond ETF (TLT).

Note the following:

The chart shows Treasuries were almost out of the danger zone marked on the chart.
The chart shows Treasuries have fallen below the danger zone on Moody’s downgrading U.S. debt.
The chart shows Treasuries are now in zone 4 (support).
The chart shows Treasuries have not been this low since Fall 2023.
Here is a historical perspective of what happened when Standard & Poor’s downgraded U.S. debt in August 2011.
- The next trading session S&P 500 fell 6.7%, and the Dow Jones Industrial Average fell 5.6%.
- Over the following weeks, the market experienced heightened volatility with consecutive days with 4+% swings in either direction.
- The stock market dropped more than 20%, technically entering a bear market for a short period.
- By December 31, 2011, the market ended the year roughly flat.
In The Arora Report analysis, the impact of the downgrade is likely to be muted and very different from 2011 for the following reasons:
- Moody’s is simply 14 years too late. Based on the data, Moody’s should have downgraded U.S. debt in 2011.
- There is no new information in Moody’s downgrade.
- In 2011, the S&P 500 downgrade was a shock. Now, everyone knows that the U.S. government spends like drunken sailors, and politicians, for the most part, recklessly borrow and spend – there is nothing new here.
- Stock market bulls are pinning their hopes on President Trump’s “big beautiful bill.” The House Budget Committee advanced the reconciliation bill. The bill includes both tax cuts and spending cuts and a debt ceiling increase. The House will likely vote later this week.
- The momo crowd is now more powerful than ever. The momo crowd does not do any analysis and does not take risk into account. The momo crowd simply buys every stock market dip on hopium.
In the early trade, true to its pattern, the momo crowd is aggressively buying stocks, taking advantage of about a 1% dip in the stock market on the downgrade.
Prudent investors should pay attention to the latest University of Michigan data. Here are the key points:
- Consumer sentiment fell to 50.8 vs. 55 consensus. As a reference, at the same time last year, the index was at 69.1.
- Inflation expectations for the year ahead increased from 6.5% to 7.3%.
In The Arora Report analysis, this particular set of data on consumer sentiment is flawed because it was before President Trump gave China the greatest deal ever. President Trump’s action has reduced consumer anxiety about tariffs in the short term.
Leading Indicators will be released today at 10am ET and may be market moving.
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

In the early trade, money flows are negative in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).

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

Very Very Short-Term Indicator

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

Bitcoin (BTC.USD) has been very volatile after the U.S. downgrade. The Senate is likely to pass the stablecoin bill. This will be the first big legislative win for the crypto industry after President Trump’s re-election.

Markets

Interest rates are ticking up, and bonds are ticking down.

The dollar is weaker.

S&P 500 futures are trading at 5916 as of this writing. S&P 500 futures resistance levels are 5926, 6017, and 6131: support levels are 5748, 5622, and 5500.

DJIA futures are down 246 points.

Gold futures are at $3231, silver futures are at $32.54, and oil futures are at $61.85.

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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.

DJIA, GLD, GOLD, MARKETS, NDX, OIL, QQQ, SILVER, SLV, SPX, SPY, USO

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