By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Major Macro Arora Call
Please click here for a chart of 20+ year Treasury bond ETF (TLT).
Note the following:
- The chart shows that long bonds fell on Trump’s win in the Supreme Court immunity decision.
- The chart shows that long bonds ran up after falling on the Trump immunity decision. The reason for the run up has been two fold.
- Weak economic data. For details, see prior Morning Capsules.
- Wall Street almost unanimously calling for investors to extend fixed income duration, leading to investors rushing to buy longer term bonds.
- The chart shows that long bonds are dropping after the assassination attempt on Trump.
- It is worth a reminder that The Arora Report is politically agnostic. We are neither for Trump nor Biden. Our sole job is to stay objective and help investors extract the maximum money out of the markets.
- It is also worth a reminder that investors should separate their politics from investing. For more on this subject, see prior writings from The Arora Report.
- We previously shared with you that the highest probability scenario was Trump winning the Presidency. In The Arora Report analysis, after the assassination attempt, the probability of Trump winning the presidency has gone up significantly.
- Over a long period of time, The Arora Report has made numerous important macro calls that went against Wall Street consensus. The record of The Arora Report major macro calls is well documented, and to date, they have been 100% correct.
- After the assassination attempt on Trump, there is a new Arora major macro call – reduce the duration of fixed income in your portfolio. This call is contrary to Wall Street’s consensus of increasing portfolio duration.
- The maximum duration in a 60/40 portfolio of bonds is being reduced from seven years to five years. Please scroll down to the “Traditional 60/40 Portfolio” section below for more details.
- We have been sharing with you in the capsules and other posts the changes that are being made now and are likely to be made in the coming months based on the highest probability scenario of Trump being elected as the next president.
- Investors have a difficult task ahead to make proper shifts in their portfolios in a timely manner. The task becomes more difficult because most of the information in the media is either provided through a political lens or there is another agenda that is not in your best interest. The Arora Report is a rare resource for investors seeking completely objective and highly analytical analysis.
- As shifts occur, time and again, it has been demonstrated that investors with deeper knowledge tend to do significantly better than investors who do not develop deeper knowledge even when both groups are receiving the same signals from The Arora Report. For those wanting deeper knowledge, listen to the podcast series in Arora Ambassador Club titled “2024 ELECTION AHEAD: SMART MONEY IS PREPARING NOW.” To get on the waitlist to join Arora Ambassador Club, please click here and fill out the form.
- For investors, the main theme to remember is that Trump’s agenda is inflationary for the economy, but also has the potential to let loose entrepreneurial spirits.
- A Trump presidency will be positive for AI stocks, with the exception of those heavily exposed to China. A Trump presidency will also be positive for companies engaged in mergers and acquisitions.
- A Trump presidency will be negative for heavily indebted companies. A Trump presidency will also be negative for Chinese stocks, Mexican stocks, and renewable energy stocks.
- 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.
China
Significant economic data has just been released in China. The most important is Q2 GDP. It came at 0.7% quarter-over-quarter vs. 1.1% consensus. Slowing growth is an impediment to China’s ambition of replacing the U.S. as the world’s number one superpower.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Apple (AAPL), Nvidia (NVDA), and Tesla (TSLA).
In the early trade, money flows are neutral in Amazon (AMZN), Meta (META), and Microsoft (MSFT).
In the early trade, money flows are negative in Alphabet (GOOG).
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.
Gold
The momo crowd is *** 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
Bitcoin (BTC.USD) is seeing aggressive buying in the wake of the assassination attempt on Trump. Trump is pro-crypto. The higher probability of Trump becoming the next president appears to be behind whales aggressively buying bitcoin. However, investors need to be careful as whales tend to run up bitcoin, getting retail investors excited. Then, whales unload bitcoin to unsuspecting retail investors.
Markets
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.
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.
Gold futures are at $2417, silver futures are at $30.87, and oil futures are at $82.27.
S&P 500 futures are trading at 5686 as of this writing. S&P 500 futures resistance levels are 5746 and 5926: support levels are 5622, 5500, and 5400.
DJIA futures are up 216 points.
Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding *** in cash or Treasury bills 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.
