By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Replacing Humans With AI Agents
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 market is breaking out above the micro resistance zone.
- The trigger for the breakout was Trump’s speech for Davos.
- The chart shows that the breakout is tenuous. A stronger breakout would have been more convincing.
- The chart shows the volume was low indicating a lack of conviction.
- RSI on the chart shows that the market is very overbought. Overbought markets tend to be vulnerable to a pull back.
- So far, since the inauguration of a new president, S&P 500 is having its best start since 1985. In 1985 Ronald Reagan was inaugurated. When Ronald Reagan was elected, there were a lot of concerns about his conservative and somewhat radical policies. Historians tell us that Reagan went on to become one of the most successful presidents in US history. The stock market under Reagan did extremely well, even though it included the 1987 stock market crash. In the 1987 crash, the stock market lost 20.47% in one day.
- In The Arora Report analysis, the future course of the market will depend on Trump’s statements. This morning there is relief that Trump has changed his stance and is now saying he would rather not impose tariffs on China. It is not only Trump’s statements but also the rumors about what Trump may say that are moving the market.
- Prudent investors should note that at this time when China and other nations are making great strides in developing digital currencies controlled by their central banks, Trump has issued an executive order to ban digital dollar. Presumably, the objective is to benefit cryptos at the expense of the dollar.
- Please be extra careful, if you are trading new cryptos. Since Trump’s inauguration there has been a flood of fake cryptos that have achieved very large valuations. Such cryptos are worth zero. Manipulators and pumpers are having a heyday.
- Artificial intelligence is taking another step forward. OpenAI has introduced Operator. Operator is an AI agent that has its own browser and can perform web related tasks autonomously. This is a big step forward to replace a large number of humans doing such tasks at present with AI agents. AI agents present numerous investing opportunities both from the long side and the short side. In due course, The Arora Report members will see signals to capture these opportunities. Those who want next level information will have podcasts in the Arora Ambassador Club.
- 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.
Japan
Bank of Japan (BOJ) has announced the biggest rate hike in 18 years. You may recall the big drop in the stock market in August of 2024 when the carry trade blew up in anticipation of rate hikes by the Bank of Japan. This time, at least for the short term, it is all calm due to the Trump effect.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Apple (AAPL), Tesla (TSLA), and Alphabet (GOOG).
In the early trade, money flows are negative in Meta (META), Amazon (AMZN), Nvidia (NVDA), and Microsoft (MSFT).
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 *** in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Trump has announced a working group to evaluate buying cryptos as a strategic reserve. Initially, bitcoin fell on disappointment that Trump did not announce a strategic reserve — to bitcoin bulls, there is nothing to evaluate. The dip was aggressively bought.
Markets
Interest rates and bonds are range bound.
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 6144 as of this writing. S&P 500 futures resistance levels are 6256, 6500, and 6700: support levels are 6131, 6017, and 5926.
DJIA futures are down 77 points.
Gold futures are at $2791, silver futures are at $31.53, and oil futures are at $75.06.
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.
