By Nigam Arora
To gain an edge, this is what you need to know today.
Crosscurrents
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 almost reaching the magnet.
- The chart shows the stock market is pulling back aggressively in the early trade today.
- The chart shows that major support zone 1 is far away. Concern is building that the stock market could quickly reach zone 1, depending upon how geopolitical events unfold.
- RSI on the chart has quickly dropped almost to the top band of the oversold zone. This indicates that without any new geopolitical news, the stock market is also set up for a sharp rebound.
- Two geopolitical events have triggered selling this morning:
- Prime Minister Takaichi’s ambition to win the election in Japan
- President Trump’s ambition for the U.S. to own Greenland
- As we have been sharing with you, Japan is very important to the U.S. market due to the carry trade. In the carry trade, funds have borrowed very large amounts in Japan in yen and invested the money in U.S. markets. To win the election, Prime Minister Takaichi wants to cut taxes. However, it is not clear what the funding source is. This is spooking the bond market in Japan. The yield on the 40 year Japanese Government Bond (JGB) has crossed above 4% for the first time ever. As yields in Japan rise, the borrowing costs for the carry trade also rise. The carry trade is often highly leveraged. For this reason, the impact of rising interest rates in Japan is disproportional.
- Eight European countries had sent troops to Greenland to deter the U.S. from annexing Greenland by force. President Trump has responded by imposing 10% tariffs on the eight countries.
- Europeans have been trying to deescalate, but President Trump has doubled down.
- Europe depends on the U.S. for security and thus is not in a position to respond militarily.
- Europe has two big weapons.
- Europeans own trillions of dollars worth of U.S. assets, including Treasury bonds. Concern is building that Europeans will start selling U.S. assets if President Trump keeps doubling down on Greenland.
- In 2024, Europe was the largest importer of U.S. services, totalling $294.7B. Concern is building that Europe could put tariffs on U.S. services.
- Markets always have crosscurrents.
- TACO (Trump Always Chickens Out) traders are aggressively buying stocks, taking advantage of the early morning dip. TACO traders are a subset of the momo crowd. TACO traders believe President Trump will soon back down on Greenland. TACO traders appear to be oblivious to what is going on in Japan and its impact on U.S. markets.
- Smart money is taking defensive steps by trimming and hedging. They are concerned about the carry trade and the tariff war reigniting.
- President Trump is calling the U.K.’s decision to give Chagos Islands to Mauritius “an act of great stupidity.” In The Arora Report analysis, President Trump is right about the U.K.’s decision for the following reasons:
- There is a major U.S. military base on the Diego Garcia island. This base is vital to preserving U.S. interest in Asia. The U.K. has arranged for a 99 year lease from Mauritius for the U.S. to keep the base.
- Mauritius is close to China.
- Other than colonial guilt, there is no reason for the U.K. to give Chagos Islands to Mauritius.
- President Trump is using the U.K.’s decision on Chagos Islands as another reason for the U.S. to acquire Greenland.
- For investors who are interested in Greenland, keep an eye on rare earth stock Critical Metals (CRML). CRML is in ZYX Buy in the portfolio that surrounds the Core Model Portfolio. CRML is developing rare earth projects in Greenland.
- The Supreme Court may rule on IEEPA tariffs today. We previously shared with you:
The consensus is the Supreme Court will find a way to support President Trump. Prudent investors need to know that companies are already lining up to seek refunds of tariffs they have paid in case the Supreme Court rules against the tariffs. The Supreme Court decision may be market moving especially if the Supreme Court rules against the tariffs.
- ADP data shows that the private sector added an average of 8,000 jobs per week over the four weeks ending December 27.
- 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 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 *** (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. 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 buying gold and silver under the assumption that these are safe trades to balance out their stock portfolios that are heavily concentrated in speculative stocks.
In The Arora Report analysis, the momo crowd’s belief is wrong. There is a big risk in buying gold here and a gigantic risk in buying silver here. This comment should carry heavy weight with investors since The Arora Report is bullish on gold and silver in the long term. The Arora Report is long gold from $1103 and long silver from $13.96. This represents a gain of 329% in gold and 521% in silver.
The momo crowd is *** gold and *** silver 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 selling.
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 6870 as of this writing. S&P 500 futures resistance levels are 7000, 7200, and 7500 : support levels are 6780, 6500, and 6256.
DJIA futures are down 703 points.
Gold futures are at $4732, silver futures are at $95.27, and oil futures are at $59.64.
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.
To take a free 30-day trial to paid services to gain access to more opportunities, please click here.
This post was just published on ZYX Buy Change Alert.
Markets can generate substantial wealth for knowledgeable investors. NOW YOU TOO CAN ALSO SPECTACULARLY SUCCEED AT MEETING YOUR GOALS WITH THE HELP OF THE ARORA REPORT. You are receiving less than 1% of the content from our paid services. …TO RECEIVE REMAINING 99%, INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES AND SIGNALS IN REAL TIME, TAKE A FREE
TRIAL TO PAID SERVICES.
The Arora Report is one of the only major global investment newsletters that does not employ a single salesperson—because it does not need to. While competitors rely on high-pressure sales tactics, The Arora Report grows purely through results, with satisfied members recommending it to their family and friends.
Join the service that investors trust the most and recommend to family and friends.
Please click here to take advantage of a FREE 30 day trial.
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.
