By Nigam Arora
To gain an edge, this is what you need to know today.
Yen Surge
Please click here for a chart of gold futures (GC_F).
Note the following:
- The chart shows that gold surged past the magnet like a hot knife through butter.
- The 200 day moving average on the chart shows the gold move is very overextended.
- RSI on the chart shows gold is overbought and vulnerable to a pullback.
- Along with gold, silver is also surging. Silver is experiencing a significant short squeeze.
- The momo crowd is rushing to buy gold ETF (GLD), silver ETF (SLV), gold miner ETF (GDX), gold miner Newmont (NEM), silver miner Hecla Mining (HL), and silver miner ETF (SIL) like there is no tomorrow. Smart money is not buying.
- The immediate trigger for the latest surge in gold is the surge in yen. The yen surged after Japanese and U.S. authorities indicated they were ready to step in to intervene in the markets. Japan’s Prime Minister Takaichi said the government will take steps against speculators. As a result of the surge in yen, stocks in Japan fell with Nikkei 225 falling 1.8%.
- In The Arora Report analysis, U.S. authorities have a good reason to help Japan. Without the U.S.’s help, Japan will sell U.S. Treasuries to finance an intervention. Japan selling U.S. Treasuries will not be good for the U.S.
- Yields in Japan declined, and Japanese government bonds (JGB) rose.
- As we have been sharing with you, Japan is very important to the U.S. markets due to the carry trade. In the carry trades, funds have borrowed hundreds of billions of dollars in Japan and invested in U.S. markets.
- The surge in yen is weighing on U.S. stocks, especially tech stocks. On the other hand, declining yields in Japan are helpful to U.S. stocks. It is highly nuanced as some funds are hedged against currency moves while some are not.
- President Trump is threatening to impose 100% tariffs on Canada if Canada proceeds with a trade deal with China. Canada is backing off. This is bringing in buying after an initial sell off in stocks in the early trade.
- The FOMC meeting will start tomorrow. The Fed’s rate decision will be released on Wednesday at 2pm ET followed by Fed Chair Powell’s press conference. In The Arora Report analysis, there is an 85% probability of no rate cut.
- Important earnings are ahead this week:
- Among Magnificent Seven earnings, earnings from Apple (AAPL), Tesla (TSLA), Microsoft (MSFT), and Meta (META) are ahead this week.
- Memory and storage stocks have been some of the hottest stocks in the market as AI has significantly increased demand. The rally will be tested when Western Digital (WDC) and Seagate Technology (STX) report earnings this week.
- Software stocks have been crushed on AI fears. Earnings from ServiceNow (NOW) will be insightful.
- While semiconductor stocks that cater to AI have been strong, stocks of companies that produce mainly analog semiconductors have been weak. Earnings from Texas Instruments (TXN) will be insightful. In due course, TXN will be a major beneficiary of humanoid robots.
- Data center stock CoreWeave (CRWV) is surging on the news of Nvidia’s (NVDA) investment. Sympathy buying is also coming into data center stocks IREN (IREN) and Nebius (NBIS).
- Durable orders data is strong.
- Durable orders came in at 5.3% vs 1.1% consensus.
- Durable orders ex-transportation came at 0.5% vs 0.3% consensus.
- 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) and Meta (META).
In the early trade, money flows are neutral in Amazon (AMZN) and Microsoft (MSFT).
In the early trade, money flows are negative in Alphabet (GOOG), Nvidia (NVDA), and Tesla (TSLA).
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. 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 selling.
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 6946 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 up 31 points.
Gold futures are at $5071, silver futures are at $109.86, and oil futures are at $60.81.
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.
