By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Tariff Pull Forward
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 previously touched the low band of support zone 3 on April 7.
- The chart shows that the stock market quickly rebounded to the low band of resistance zone 2.
- The chart shows that after the first quick rebound, the stock market pulled back to support zone 2 and then started rallying again.
- The chart shows that the stock market is now knocking at the door of the low band of resistance zone 2 again.
- Stock market bulls are predicting that the market will move rapidly towards resistance zone 3. Stock market bears are predicting the market is likely to pull back to support zone 2.
- In The Arora Report analysis, both of the foregoing scenarios have a fair probability. Further, the near term direction will be determined by earnings. In the longer term, the stock market is ignoring tariff pull forward.
- In The Arora Report analysis, there has been significant positive economic activity from tariff pull forward.
- Consumers bought ahead of tariffs going into effect.
- Businesses bought ahead of tariffs to build inventories.
- Importers imported to build inventories ahead of tariffs.
- We previously shared with you that there is over 70% probability that earnings this season will be better than consensus. One of the reasons is tariff pull forward.
- Here is the question prudent investors need to ask: What will be the impact of tariff pull forward on economic activity now and earnings for the next earnings season?
- The answer to the foregoing question is that the impact of the tariff pull forward will be negative
- Sentiment remains positive due to expectations that President Trump will announce several trade deals soon.
- The stock market is very optimistic about a deal with China. However, in The Arora Report analysis, investors should differentiate between a potential positive headline and a substantive deal. Even if there is a positive headline, the probability of a substantive deal is nowhere near what the stock market expects.
- Indications coming out of China are that negotiations will not be easy.
- President Xi of China is attempting to turn several countries against the U.S.
- Treasury Secretary Bessent is focused on lowering the 10 year Treasury yield. This focus is understandable considering the heavy borrowing needs of the U.S. The Treasury has just announced that details of borrowings:
- Q1 $369B
- Q2 $514B
- Q3 $554B
- JOLTS job openings and consumer confidence will be released 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.
Canada
Not long ago when Justin Trudeau announced his resignation, liberals were not in a strong position. In a dramatic turn around, liberals led by Mark Carney won the election. Liberals were helped by the anti-Trump sentiment. Conservative leader Pierre Poilievre lost his own seat.
From investors’ perspective, there are two key points:
- Carney’s victory is narrow.
- Under Carney, Canada is expected to be the leader of the anti-Trump mantle in the West.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN).
In the early trade, money flows are neutral in Apple (AAPL), Alphabet (GOOG), Microsoft (MSFT), Meta (META), and Tesla (TSLA).
In the early trade, money flows are negative in Nvidia (NVDA).
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
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 range bound.
Markets
Interest rates are ticking up, and bonds are ticking down.
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.
S&P 500 futures are trading at 5552 as of this writing. S&P 500 futures resistance levels are 5622, 5748, and 5926 : support levels are 5500, 5400, and 5256.
DJIA futures are up 149 points.
Gold futures are at $3317, silver futures are at $33.54, and oil futures are at $61.12.
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.
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.
