By Nigam Arora
To gain an edge, this is what you need to know today.
Trade Probe
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 the rally from Monday’s low has failed.
- The chart shows that SPY is now in zone 1 (support).
- The Arora Report charts show premarket data for the current day but for historical data show only regular sessions. For a majority of the situations, this leads to better analysis. However, here it is important to know that the premarket low on Monday shown on this previously published chart was $641.61. SPY is trading at $642.09 as of this writing in the premarket. If the market does not bounce from here, it will be a negative.
- RSI on the chart shows the stock market is oversold again.
- Yesterday, the stock market experienced significant institutional selling during the regular session on concerns about the approaching weekend. As a member of The Arora Report, you were ahead of the curve. Yesterday, the headline of the Morning Capsule published before the stock market opened was “MARKETS DO NOT LIKE LACK OF PROGRESS APPROACHING WEEKEND.” We indicated that there would be institutional selling.
- President Trump is a keen watcher of the stock market. Minutes after the stock market hit the lows yesterday, President Trump extended the deadline to bomb Iran’s energy infrastructure to April 6. In the after market, the stock market rallied, but then China issued a blow. China is starting a trade probe against the U.S. Of note is that China is starting this probe at a time when the U.S. is preoccupied in the Middle East and before the Trump and Xi summit. The stock market did not expect such an aggressive move by China against the U.S., and as such, this move has brought in more selling in the early trade.
- There are two very different interpretations of President Trump’s move to extend the deadline:
- For the stock market, the positive interpretation is that President Trump is trying very hard to extract the U.S. out of the situation even though Iran is not cooperating.
- The interpretation that is negative for the stock market is that the U.S. military was not ready to carry out President Trump’s ultimatum and needed more time. With the extension, President Trump bought more time for the U.S. military to prepare for a big attack on Iran.
- The price action in the stock market today will depend on which of the foregoing two narratives takes dominant hold.
- University of Michigan consumer sentiment will be released at 10am ET.
- Turkey is selling gold. Please see the gold section below.
- 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.
Japan
Japan’s Finance Minister Katayama is warning that Japan may intervene to support the yen. Prudent investors need to keep an eye on such developments in Japan due to the carry trade. In the carry trade, funds have borrowed hundreds of billions of dollars in Japan and invested in the U.S., lately in the AI trade.
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 neutral in Apple (AAPL).
In the early trade, money flows are negative in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Tesla (TSLA).
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
As a member of The Arora Report, you have been ahead of the curve. We previously shared with you that central banks were now selling gold. Now the news is out that Turkey has sold about 54 tonnes of gold to support its currency lira.
Momo gurus are in shock. As we have previously shared with you, a vast majority of momo gurus who were leading the momo crowd to buy gold near the highs had no history or experience with gold but claimed to have become instant experts. Prudent investors need to keep in mind that such momo guru behavior is common. Momo gurus often become instant experts on whatever is popular.
The momo crowd is *** in gold in the early trade, and 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 *** 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 selling.
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 6488 as of this writing. S&P 500 futures resistance levels are 6600, 6780, and 7000 : support levels are 6481, 6322, and 6256.
DJIA futures are down 220 points.
Gold futures are at $4434, silver futures are at $67.98, and oil futures are at $96.84.
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.
