To gain an edge, this is what you need to know today.
Lack Of Sellers
Please click here for a chart of SPDR S&P 500 ETF Trust (NYSE:SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- The chart shows that after a very shallow pullback, the stock market has moved higher.
- The chart shows that in this bullish environment, the breakout line acted as support.
- The chart shows that the volume remains low during this rally. The interpretation in this case is that there are very few sellers. As a result, it does not take much for the market to go higher.
- In The Arora Report analysis, here are the reasons for the lack of sellers:
- Sellers want to wait until 2025 to book profits to defer paying taxes by one year.
- Sentiment is extremely positive.
- Complacency has set in among retail investors.
- Professional traders and money managers are waiting for the year end chase by under performing money managers.
- RSI on the chart shows that the stock market is overbought.
- China is responding to the latest U.S. sanctions on the export of certain semiconductors and semiconductor manufacturing equipment to China.
- China has outright banned the export of gallium, germanium, and antimony to the U.S. China is also restricting export of graphite to the U.S. These materials are important in manufacturing certain semiconductors, night vision goggles, and certain parts of satellites. Among the beneficiaries of China's restrictions on exports to the U.S. is Mp Materials Corp (NYSE:MP). The stock is up about 13% as of this writing in the premarket.
- JOLTS jobs openings will be released at 10am ET and may be market moving.
- Investors are looking for clues to the jobs report that will be released on Friday at 8:30am ET. In The Arora Report analysis, the jobs report will play a major role in determining what the Fed does next.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corp (NASDAQ:NVDA), Meta Platforms Inc (NASDAQ:META), and Apple Inc (NASDAQ:AAPL).
In the early trade, money flows are neutral in Alphabet Inc Class C (NASDAQ:GOOG).
In the early trade, money flows are negative in Microsoft Corp (NASDAQ:MSFT) and Tesla Inc (NASDAQ:TSLA).
In the early trade, money flows are positive in SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).
Momo Crowd And Smart Money In Stocks
Investors can gain an edge by knowing money flows in SPY and QQQ. Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil. The most popular ETF for gold is SPDR Gold Trust (NYSE:GLD). The most popular ETF for silver is iShares Silver Trust (NYSE:SLV). The most popular ETF for oil is United States Oil ETF (ASCA:USO).
Bitcoin
Bitcoin (CRYPTO: BTC) is range bound, trading under $95,000.
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 a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. 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.
The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.
