By Nigam Arora
To gain an edge, this is what you need to know today.
Market Positioning
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 is a 15 minute chart to illustrate the price action since three AI leaders advocated for an AI slowdown.
- The chart shows the initial drop on AI slowdown fears.
- The chart shows that the stock market rallied from the lows.
- The stock market rally was primarily driven by President Trump. President Trump acted on both fronts that were driving the stock market lower. One was AI fears, and the second was rising oil.
- On the AI front, President Trump rejected calls for slower AI development. President Trump emphasized that a slowdown could impact the U.S.’s position vs. China. At the All-In Summit, Nvidia (NVDA) CEO Jensen Huang had President Trump on speaker phone live before the audience. President Trump said that those advocating for an AI slowdown were engaging in a “sick conspiracy.”
- On the oil front, President Trump posted, “The failing nation of Iran wants to make a deal, quickly and badly. I will determine whether or not the USA will choose to engage – The concept of which we are open to.”
- As of this writing, the yield on 10 year Treasuries is hovering around 5%. This is the highest level since 2007. Here is the key question: Will the 10 year yield back off from here, or will it march toward 5.25%? In The Arora Report analysis, the stock market is positioned for the yield to back off. The stock market is not prepared for the yield to rise to 5.25%.
- President Trump says the U.S. should have lower interest rates. The FOMC meeting starts today. The Fed’s rate decision will be announced tomorrow at 2pm ET. Fed fund futures are predicting a 92.5% probability of a rate hike. Here is the key question: Will the FOMC listen to President Trump? On the surface, the Fed will say it is independent.
- In The Arora Report analysis, the hard data clearly establishes the need for the Fed to raise interest rates.
- Further in The Arora Report analysis, an even more important question is how the markets will react to the Fed decision. There is no consensus. There is a fair probability that long end yields will come down and stocks will go up if the Fed raises rates as this will indicate that the Fed is being responsible. On the other hand, if the Fed does not raise rates, this will hurt the Fed’s reputation and will be negative in the long term. However, the momo crowd may aggressively buy stocks as the momo crowd is addicted to artificially low interest rates.
- 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 Nvidia (NVDA).
In the early trade, money flows are neutral in Tesla (TSLA).
In the early trade, money flows are negative in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Apple (AAPL).
In the early trade, money flows are mixed 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 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 7692 as of this writing. S&P 500 futures resistance levels are 7700, 7831, and 7900 : support levels are 7318, 7194, and 7032.
DJIA futures are down 43 points.
Gold futures are at $4295, silver futures are at $64.25, and oil futures are at $101.56.
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.
