By Nigam Arora
To gain an edge, this is what you need to know today.
Bond Danger Signal
Please click here for a chart of 20+ year Treasury bond ETF (TLT).
Note the following:
- The chart shows TLT has fallen below the Arora danger zone.
- RSI on the chart shows TLT is oversold.
- Prudent investors should note TLT falling below the Arora danger zone is very important because it signals that rising yields have moved beyond ordinary volatility and into a technically weaker regime.
- This morning the 10 year Treasury yield reached about 5.34% and the 30 year yield reached about 5.68%. These are the highest levels since 2002. As of this writing, yields are pulling back. It is not just the U.S., yields in France and the U.K. also jumped before pulling back.
- Smart money is taking the fall in TLT seriously. This is an early warning to stock investors and not just bond investors. Rising long term yields increases competition for stocks.
- In The Arora Report analysis, prudent investors should not ignore long term yields. The momo crowd continues to ignore them.
- In The Arora Report analysis, not only is TLT oversold, the number of shorts in long bonds have increased. This is a perfect set up for a short squeeze that could bring TLT back into the danger zone from below the danger zone.
- The official jobs report will be released tomorrow at 8:30am ET. In The Arora Report analysis, it will be very critical.
- If the jobs report is somewhat weak, it could trigger a short squeeze in bonds and, in turn, a vicious short squeeze in stocks causing a major rally.
- If the jobs report is very weak, it could trigger a bigger short squeeze in bonds, but stocks may fall on the prospect of a slowing economy.
- If the jobs report is strong, yields will likely rise further. However, a battle royale will likely take place between bulls and bears in the stock market. Bulls will contend that the economy is so strong it can handle a rise in yields. Bears will contend that the stock market is simply too high relative to yields.
- Micron reported earnings and guided better than the consensus but below whisper numbers. Micron gross margins are slightly below consensus.
- It is the first time in several quarters that bulls and bears in Micron stock (MU) are balanced. The result is that MU stock is range bound, without much movement, after earnings. The biggest losers are option buyers in MU stock as the options market was forecasting a 7% move. Also on the losing end are those who used popular AI chatbot analysis to buy the options. This is a good illustration as to why using AI chatbots to make actual financial decisions can be dangerous to your financial well being. AI chatbots are great for preliminary research but not for decision making.
- This morning, the news is that Broadcom (AVGO) will lend $42B to Anthropic for leasing Broadcom chips. Prudent investors should pay attention to the market’s reaction in AVGO stock. If this news had come out in June 2026, AVGO stock would have been up 10% – 15% in the premarket. Today, in the premarket, AVGO stock is only up 0.5%.
- The market’s reaction to Micron earnings and the big Broadcom deal shows that the current phase of AI is different from the prior phase. One of the biggest mistakes the momo crowd is making right now is they are not understanding the major shift and continue to act like AI is still in the prior phase. This is nothing new. Historically, the momo crowd is almost always behind the curve. This is how the momo crowd ends up losing money. In contrast, smart money is always trying to get ahead of the curve. The easiest way for prudent investors to get ahead of the curve about the next phase of AI is to listen to the podcast series Next Phase of AI in Arora Ambassador Club.
- Expect blind money to flow into the stock market today and tomorrow. Blind money is the money that flows into the stock market on the first two days of the month without any analysis irrespective of market conditions.
- In the early trade, Wall Street is front running blind money. In front running, Wall Street buys stocks and then sells them to blind money at higher prices. Blind money never catches on because they have drank the Kool-Aid that they are not smart enough to analyze the market.
- Initial jobless claims came at 197K vs. 200K consensus.
- ISM Manufacturing Index 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.
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 positive in Amazon (AMZN), Alphabet (GOOG), Meta (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA).
In the early trade, money flows are negative in Apple (AAPL).
In the early trade, money flows are positive 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. This is reflected in gold ETF (GLD), silver ETF (SLV), gold miner ETF (GDX), and silver miner ETF (SIL). 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) is range bound.
Markets
Interest rates and bonds are range bound.
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 7732 as of this writing. S&P 500 futures resistance levels are 7733, 7795, and 7831 : support levels are 7626, 7541, and 7318.
DJIA futures are up 105 points.
Gold futures are at $4202, silver futures are at $61.45, and oil futures are at $90.62.
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.
