By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Storm Ahead
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 post-Trump tariff reversal rise stopped right at the low band of resistance zone 2. This illustrates the power of the support and resistance zones as computed by The Arora Report. This is not a one time coincidence. Longtime members of The Arora Report know this has happened hundreds of times. This is one of the reasons longtime members cherish the charts from The Arora Report.
- RSI on the chart shows there is more room for the stock market to go higher.
- The chart shows that the volume on the rise was heavy. This indicates conviction.
- In The Arora Report analysis, this morning there is selling on concerns about the rapid drop in the dollar. The stock market party triggered by the tariff pause is being hampered by selling in the dollar and bonds.
- In the Arora Report analysis, the selling in the dollar and bonds appears to be coming from foreigners.
- Prudent investors need to understand the real reason for the timing of President Trump’s quick reversal on tariffs after imposing them.
- The following are the reasons given by the administration for the reversal:
- Art of the deal
- 75 countries wanting to negotiate
- Opinion of business leaders
- In The Arora Report analysis, the foregoing played a role, but the real reason for the tariff reversal was likely the rise in bond yields.
- As a member of The Arora Report, you were in the know from the beginning.
- From Tuesday’s Morning Capsule:
In The Arora Report analysis, prudent investors should pay attention to bonds. At this point in time, bonds are like a canary in the coal mine. Bond yields have rapidly risen from their lows yesterday morning in a dizzying move. Yields on 10 year Treasuries have risen from 3.865% yesterday morning to 4.226% as of this writing.
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- The title of Wednesday’s Morning Capsule included “bond canary sick.” The Arora Report wrote:
The result of the $58B three year note auction showed weak demand. This indicates that the canary is sick.
- In The Arora Report analysis, yesterday bond yields were getting close to triggering a full blown financial crisis. Treasury Secretary Bessent is an ex-hedge fund guy. He understands the bond market and knew it was time to act. It appears he prevailed with President Trump.
- Here is what was extraordinary about the rising bond yields. Historically, when the stock market experiences a big drop, money flows out of stocks and into Treasury bonds. The higher money flows are into Treasury bonds, the lower the yields. Treasury bonds historically act as a safe haven. Over the last two days, in extraordinary behavior, instead of acting like a safe haven as they have historically, Treasury bonds were cratering at a dizzying pace. Bonds move inverse to the yield.
- In The Arora Report analysis, the reason bonds were behaving extraordinarily was that the U.S. as a country was losing its safe haven status.
- Looking forward, in The Arora Report analysis, gold may be replacing Treasury bonds as a safe haven. The Arora Report gold ratings are used by investors, hedge funds, bullion dealers, and jewelers across the globe. You can access the gold ratings from the main menu. Gold ETF GLD is in ZYX Allocation Model Portfolios.
- The core gold position is a strategic position.
- Recently, a signal was given for an additional trade around position as a tactical position in gold in ZYX Allocation. Yesterday, profits were taken in the trade around position.
- The foregoing is an example of judicious use of strategic positions and tactical positions.
- With the judicious use of strategic positions and tactical positions, you can dramatically increase returns and reduce risks. This is one sophistication element that all investors should consider learning. Please see Trade Management Guidelines. Those who want deeper knowledge or want to shorten the learning process by a decade may consider attending the Higher Returns With Bulletproof Techniques seminar.
- Prudent investors should note that trade talks with China have not yet started.
- Initial jobless claims came at 223K vs. 225K consensus. This indicates that the jobs picture is still strong. Prudent investors need to keep in mind that historically the jobs picture can deteriorate very quickly.
- In The Arora Report analysis, the just released inflation data is an anomaly. Headline Consumer Price Index (CPI) has been driven lower by falling gasoline prices. CPI came cooler than expected. Here are the details:
- Headline CPI came at -0.1% vs. 0.1% consensus.
- Core CPI came at 0.1% vs. 0.3% consensus.
- In the Arora Report analysis, a storm is likely ahead as tariffs take hold. The tariffs will likely be less than the ones that were paused for 90 days. President Trump appears to be insisting on a 10% floor on tariffs.
- In the middle of the euphoria, prudent investors need to remember that there is a high probability for the scrooge of stagflation to raise its ugly head. You do not want the scrooge of stagflation to drain your portfolio. For those who want next level information, there is a new podcast in Arora Ambassador Club and more podcasts on stagflation are coming.
- 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.
Magnificent Seven Money Flows
In the early trade, money flows are negative in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (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 protection band and signals. Please click here and here to understand how signals are generated.
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 *** 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. The data from the recent stock market swoon is clear that bitcoin is not a hedge, and cryptos other than bitcoin suffer bigger losses during times of stress Ironically, crypto promoters continue promoting cryptos as a hedge to the unsuspecting masses.
Markets
Interest rates are ticking down, and bonds are ticking up.
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 5382 as of this writing. S&P 500 futures resistance levels are 5400, 5500, and 5622: support levels are 5256, 5210, and 5020.
DJIA futures are down 538 points.
Gold futures are at $3140, silver futures are at $30.93, and oil futures are at $60.20.
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.
