By Nigam Arora
To gain an edge, this is what you need to know today.
Advance In Memory Chips
Please click here for a chart of oil ETF (USO).
Note the following:
- The chart shows oil ETF USO moving up on two crosscurrents. President Trump’s Russia diesel deal is negative for oil, but the Houthi attack on Saudi Arabia is positive for oil.
- The chart shows oil ETF USO has moved into zone 1 (resistance).
- RSI on the chart shows USO has room to run in either direction.
- President Trump has announced a landmark diesel deal with Russia aimed at bringing down energy prices. Under the deal, Russia will immediately supply more than 300,000 tons of diesel to the U.S. and global markets, followed by another 500,000 tons in November and another 1 million tons thereafter.
- In The Arora Report analysis, these diesel quantities are relatively small compared to global diesel consumption and are unlikely to make a significant difference in prices on their own.
- Ukraine has been targeting Russian oil refineries. This has disrupted Russian fuel production, putting additional pressure on diesel supplies. To change the landscape, President Trump has also announced an energy ceasefire between Russia and Ukraine, under which both countries would stop attacking each other’s energy infrastructure. However, Ukrainian President Zelenskyy said he was surprised by the announcement, and Ukraine was willing to comply if Russia did the same. Ukraine is already accusing Russia of violating the ceasefire by attacking its power plants, including one in Kharkiv.
- To allow the deal, the Trump administration has temporarily eased U.S. sanctions on Russian diesel. In The Arora Report analysis, reversing part of the pressure Washington has been putting on Russia over the Ukraine war could provide Russia with additional revenue to finance the war. For investors, the important point is that the additional diesel supply could help at the margin, but meaningful relief in energy prices will depend much more on whether attacks on energy infrastructure stop and whether the broader geopolitical risks ease.
- Iran backed Houthi rebels in Yemen launched missile and drone attacks on Saudi Arabia, including a devastating strike on Riyadh’s international airport that killed at least 13 people and injured more than 300. On an ongoing basis, we have been sharing with you how the conflict in Yemen spills over to Saudi Arabia.
- In The Arora Report analysis, the risk to oil supplies is significant. Saudi Arabia is the world’s largest oil exporter, and the Houthis have demonstrated their ability to strike targets deep inside the country, including oil infrastructure. Houthis have also threatened shipping through the strategically important Bab el-Mandeb Strait, a major route for oil shipments. A successful attack on Saudi oil production or export facilities could disrupt millions of barrels of daily supply. The danger of a wider war disrupting Saudi oil supplies could easily outweigh the benefit of additional Russian diesel.
- The semiconductor industry has been working on a new memory technology called 4F², which allows more memory to be packed into the same space on a chip. Today’s mainstream DRAM technology uses a 6F² design. Moving from 6F² to 4F² reduces the area required for each memory cell by one third, potentially increasing memory density by as much as 50% and reducing manufacturing costs.
- China’s ChangXin Memory Technologies (CXMT) says it has made significant progress with 4F² technology and plans to introduce a product before year end. The three largest manufacturers Samsung (SSNLF), SK Hynix (SKHY), and Micron (MU) are also working on 4F². In The Arora Report analysis, the concern for Micron investors is that China’s ChangXin could become a more formidable competitor, leading to increased memory supply and pressure on prices and profit margins. However, the big question is whether ChangXin can manufacture the 4F² chips in large volumes with acceptable yields, reliability and competitive costs. As full disclosure, MU is in ZYX Buy and long from an average of $21.77. MU is trading at $1005.00 as of this writing in the premarket, representing a gain of 4516%.
- Tomorrow morning will bring earnings from major banks JPMorgan Chase (JPM), Citigroup (C), Goldman Sachs (GS), and Wells Fargo (WFC). As full disclosure, JPM Is in the ZYX Buy Core Model Portfolio. It is long from an average of $34.14. JPM is trading at $334.28 as of this writing in the premarket, representing a gain of 879%. C is also in the ZYX Buy Core Model Portfolio with great gains.
- Consumer Price Index (CPI) will be released on Wednesday at 8:30am ET, and Producer Price Index (PPI) will be released on Thursday at 8:30am ET.
- 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 Apple (AAPL), Meta (META), and Microsoft (MSFT).
In the early trade, money flows are neutral in Amazon (AMZN), Alphabet (GOOG), and Tesla (TSLA).
In the early trade, money flows are negative in Nvidia (NVDA).
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 *** 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
The bond market is closed for the holiday.
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 7865 as of this writing. S&P 500 futures resistance levels are 7900 and 8000 : support levels are 7831, 7795, and 7733.
DJIA futures are down 3 points.
Gold futures are at $4196, silver futures are at $60.89, and oil futures are at $93.47.
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.
