By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Momo Hopium Dashed
Please click here for a chart of General Motors (GM).
Note the following:
- The Morning Capsule is about the big picture and not an individual stock. The chart of GM is being used to illustrate the point.
- Momo crowd is one of the two most important groups in the stock market. Momo crowd doesn’t do much analysis and lives in a fantasy hopium world. The prudent investors need to ask this question: What will happen to the stock market if momo crowd fantasy hopium comes crashing down?
- The chart provides us with an answer.
- President Trump has been very clear that he wants automotive production in the United States. He has also been very clear that significant tariffs on automobiles were coming.
- The chart shows that the momo crowd has been running up GM stock on fantasy hopium. Momo gurus conjured up all kinds of fantasies — exemptions, carve outs, delays, and low tariff rates.
- Yesterday, momo crowd fantasy hopium came crashing down when President Trump announced 25% tariffs on imported cars and light trucks.
- There are no delays. Tariffs go into effect on April 2nd and the US starts collecting tariffs on April 3rd.
- The tariff rate is high.
- With the exception of US made auto parts, there are no exemptions and carve outs.
- The chart shows the gap down in GM stock.
- GM imports about 49% of its vehicles. As a reference, Ford (F) imports about 20% of its vehicles. Stellantis (STLA), the owner of Chrysler and Jeep, is less exposed because it manufactures more components in the United States.
- In The Arora Report analysis, the total hit to the automotive industry will be about $80B.
- Further in The Arora Report analysis, GM earnings may be hit by 25% – 30%. With that kind of hit to the earnings, GM stock should be down a lot more. By now you may be asking why GM stock is not down more.
- Momo crowd is aggressively buying GM stock as buy the dip mentality prevails.
- Momo gurus are urging their followers to buy GM stock as momo gurus contend that tariffs will be short-lived.
- Prudent investors should pay attention to what President Trump is saying. President Trump is clearly saying that these tariffs are permanent.
- In The Arora Report analysis, investors should not totally ignore what President Trump is saying, even though he frequently changes his mind.
- The reason that The Arora Report calls were so successful during President Trump’s first term is that at The Arora Report we learned to focus on what President Trump was trying to do. For those who want next level information on how to navigate President Trump’s pronouncements, listen to the podcast in Arora Ambassador Club.
- Market mechanics continue to be on the upside. Without the buying pressure from market mechanics, the market would have been down significantly this morning. The drop in the market after hours on the tariff announcement was bought.
- The employment picture continues to be steady. Initial jobless claims came in at 224K vs. 225K consensus. Initial claims is a leading indicator and carries heavy weight in our adaptive ZYX Asset Allocation Model with inputs in ten categories. In plain English, adaptiveness means that the model changes itself with market conditions. Please click here to see how this is achieved. One of the reasons behind The Arora Report’s unrivaled performance in both bull and bear markets is the adaptiveness of the model. Most models on Wall Street are static. They work for a while and then stop working when market conditions change.
- Third estimate for Q4 GDP came at 2.4% vs. 2.3% consensus. This is a lagging indicator. However, you need to pay attention to it because institutional investors pay attention to it.
- Feds’ favorite inflation gauge PCE will be released tomorrow at 8:30 am ET.
- 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.
Stock 72 Hours Of Food
Prudent investors should pay attention that risks across the globe are rising. In the latest development, the European Union is asking citizens to stockpile 72 hours of food. The trigger for this alarming call from the EU is twofold.
- Russia appears to be succeeding in settling the Ukraine War on favorable terms.
- Trump administration’s confrontational approach towards Europe.
China
China has developed a new powerful ship to cut undersea cables. Taiwan is highly dependent on undersea cables. There is increasing belief that China is preparing to attack Taiwan in 2027.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Tesla (TSLA).
In the early trade, money flows are negative in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Apple (AAPL).
In the early trade, money flows are negative in S&P 500 ETF (SPY) and in 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.
Very Very Short-Term Indicator
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.
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 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 5747 as of this writing. S&P 500 futures resistance levels are 5926, 6017, and 6131: support levels are 5622, 5500, and 5400.
DJIA futures are down 35 points.
Gold futures are at $3056, silver futures are at $34.59, and oil futures are at $69.67.
Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror. The proprietary protection band from The Arora Report is very popular. The 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.
