By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Sentiment Boost
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows that the blistering rally yesterday brought tech stocks close to the pre-Liberation Day close.
- The pre-Liberation Day close is shown on the chart in cyan.
- In The Arora Report analysis, a big part of the blistering rally shown on the chart yesterday was a short squeeze.
- The Arora Report algorithms are showing that this leg of the short squeeze is near an end. Unless there is a new leg of short squeeze or new news, tech stocks may pull back.
- Here is the key question for prudent investors: As tech stocks recover most of the losses since Liberation Day, have the macro risks also proportionately returned to the same levels as pre-Liberation Day?
- The answer to the above question is the macro risks are much higher now than before Liberation Day.
- Helping the sentiment in tech stocks is news from Apple (AAPL), Alphabet (GOOG, GOOGL), and Tesla (TSLA).
- Apple is going to produce most iPhones in India by 2026. In The Arora Report analysis, the stock market is only focused on the positive aspects here, but ignoring that about 20% of Apple sales in China are now at a higher risk – Apple is infuriating China by moving production to India.
- Alphabet reported earnings better than the consensus and whisper numbers. Most important is that profits from search advertising have held up. Right now, investors are focused on the positives, but ignoring that Google’s search market share has decreased. The market is ignoring the threat Google search faces from the likes of ChatGPT. The anecdotal evidence is that more educated people are using Google less and AI chatbots more. Google is making some progress with its own AI chatbot but not enough to offset the existential threat.
- The U.S. will relax some self-driving regulations that Tesla CEO Elon Musk has criticized. This will be helpful to Tesla.
- Positive for AI stocks such as Nvidia (NVDA), AMD (AMD), Vertiv (VRT), Marvell (MRVL), Broadcom (AVGO), and Super Micro Computer (SMCI) is that Google is indicating a capex of $75B for FY25.
- On the negative side, Intel (INTC) guides Q2 below consensus after reporting better than consensus earnings and revenues for Q1.
- On the trade front, there are two positive developments:
- Both the U.S. and India are working towards India potentially being the first country to sign a trade deal.
- Trade progress has been made with South Korea, and South Korea may be right behind India with a trade deal.
- A big part of the rally yesterday was President Trump saying he had talks with China. President Trump refused to say who the talks were with and what was discussed. However, China has denied that it is in talks with the U.S. The stock market believed President Trump and ignored China’s denial.
- The Chinese embassy has just come out stating that there are no tariff talks with the U.S. and the U.S. should stop creating confusion.
- Adding to the positive sentiment this morning is that China may exempt some important U.S. goods from tariffs. The reason appears to be economic as the cost of some of these goods have risen too much.
- 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.
A New War Risk
India claims that a terrorist attack in the state of Kashmir was carried out by Pakistanis with support from Pakistan’s government. Pakistan denies the claim.
Among other measures, India has put the Indus Waters Treaty in abeyance. The treaty governs how water is distributed from the rivers that flow through India to Pakistan.
India has taken an unprecedented step. In the past, even during times of war between the two countries, India did not suspend the Indus Waters Treaty.
Investors need to keep in mind that both India and Pakistan possess substantial nuclear arsenals.
Even though the stock market is oblivious at this time, the situation has the potential to increase global risk.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Meta (META), Amazon (AMZN), NVDA, GOOG, and TSLA.
In the early trade, money flows are negative in Microsoft (MSFT) and 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
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 seeing buying. There is a new narrative developing – bitcoin is low beta when tech stocks go down and a higher beta when tech stocks go up. The recent data supports this narrative. In The Arora Report analysis, if this data holds up going forward, it will be positive for bitcoin.
Markets
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.
S&P 500 futures are trading at 5502 as of this writing. S&P 500 futures resistance levels are 5622, 5748, and 5926: support levels are 5400, 5256, and 5210.
DJIA futures are down 169 points.
Gold futures are at $3305, silver futures are at $33.27, and oil futures are at $61.93.
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.
