By Nigam Arora
To gain an edge, this is what you need to know today.
Contrary Arora Call
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows a rally in tech stocks when the Supreme Court decision came out striking President Trump’s tariffs.
- The Interim Capsule provided to members of The Arora Report immediately after the Supreme Court decision now seems prescient. We wrote:
The Supreme Court has ruled against the Trump tariffs saying the president does not have the authority to impose tariffs under IEEPA. The stock market has staged a vigorous rally in response. In The Arora Report analysis, the stock market response is short sighted for the following reasons:
- President Trump has several other options to impose tariffs.
- Tariffs are bringing in substantial revenue. Without tariffs, there will be a higher deficit and more debt.
- The Supreme Court decision reduces the leverage President Trump has to negotiate with other countries.
- Corporations will seek refunds of tariffs paid, exacerbating the budget deficit.
As an actionable item, there is no change in the Arora Protection Band.
- Of note is that at a time when Wall Street was issuing calls to buy stocks and the momo crowd was aggressively buying stocks, The Arora Report did not issue a buy signal for U.S. stocks and did not lower the proprietary Arora Protection Band.
- The chart shows smart money sold the rally as the day progressed.
- As The Arora Report predicted, President Trump later imposed 15% tariffs under Section 122 of the Trade Act of 1974.
- The chart shows that during the bulk of the rally, with the exception of late day short covering, the proprietary VUD indicator was orange, indicating a net supply of stocks in spite of aggressive momo crowd buying. The VUD indicator is the most sensitive measure of net supply and demand in real-time. The orange represents net supply and the green represents net demand.
- The chart shows the drop in the early trade today in tech stocks as the stock market reacts to 15% tariffs.
- The chart shows the tariff line. Investors should carefully watch to see if tech stocks stay above this line or if they break below. If tech stocks stay above the tariff line, it will indicate that the momo crowd is temporarily winning.
- In The Arora Report analysis, Wall Street is wrong. Wall Street buying is based on the following:
- Reduced uncertainty
- Lower inflation
- Lower interest rates
- Better relationships with other countries
- Higher earnings for companies
- Company earnings juiced by tariff refunds
- In a contrary call, The Arora Report analysis shows the following after the Supreme Court’s decision:
- Higher uncertainty
- Higher interest rates
- Weaker dollar
- Higher budget deficit
- Higher national debt
- U.S. losing leverage in geopolitics
- Tariff refunds delayed by years
- In The Arora Report analysis, Wall Street is ignoring three elephants in the room:
- Tariffs were paying for about 70% of the recent tax cut. Without tariffs, the budget deficit will go higher.
- Tariffs were helping to rebuild the manufacturing base in America. Without tariffs, the hollowing out of the American industrial base will continue.
- The Supreme Court decision is a gift to China and Russia.
- The Supreme Court decision will have a wide ranging impact. For those who want next level information, listen to the podcast titled “THE $5 TRILLION LIE: WALL STREET IS WRONG — TARIFF RULING WEAKENS AMERICA” in Arora Ambassador Club. To get on the waitlist to join the club, please click here to fill out the form.
- President Trump will deliver his State of the Union address tomorrow at 9pm ET. The State of the Union address will likely be market moving.
- In The Arora Report analysis, tariff uncertainty is good for gold, silver, and many international markets such as India, Japan, and Vietnam. The ZYX Allocation Model Portfolio contains Japan ETF (EWJ), India ETF (EPI), and Vietnam ETF (VNM).
- 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 Alphabet (GOOG) and Nvidia (NVDA).
In the early trade, money flows are negative in Amazon (AMZN), Microsoft (MSFT), 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 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 and is especially aggressive 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. Bitcoin bulls are disappointed that tariff uncertainty is not causing a run up in bitcoin. Afterall, investors were sold the idea of bitcoin being a hedge against uncertainty.
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 6902 as of this writing. S&P 500 futures resistance levels are 7000, 7200, and 7500 : support levels are 6780, 6500, and 6256.
DJIA futures are down 210 points.
Gold futures are at $5169, silver futures are at $86.01, and oil futures are at $66.82.
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.
