A Rumor Helps Bitcoin Break Out, New Data Shows Weakening Business Spending

To gain an edge, this is what you need to know today.

Bitcoin Breaks Out

Please click here for an enlarged version of the chart of Bitcoin Futures.

Note the following:

• The chart shows bitcoin BTC/USD broke out.
• RSI on the chart shows bitcoin has room to run. The severely overbought condition in bitcoin has been relieved by bitcoin being range bound for a few days.
• There is no resistance for bitcoin between here and $65,000.
• The rise in bitcoin seems to be triggered, in part, by a rumor that Microsoft Corp MSFT will start supporting bitcoin in its products. In The Arora Report analysis, at this time, there is no credibility to this rumor.  More than likely, it is simply another tool used by whales to drive bitcoin higher.  Having said that, stranger things have happened.
• Upcoming halving is also contributing to buying in bitcoin.
• The sharp rise in bitcoin is an indication of overall extreme positive sentiment in the market.
• The momentum in bitcoin could slow or even reverse if the market starts paying attention to anything other than momentum and AI.
• Bitcoin whales get investors excited about buying bitcoin, then whales tactically sell into the strength without slowing the rise. If momentum reverses, then whales sell aggressively.
• Bitcoin miners are being aggressively bought. This is a leading indicator.
• In The Arora Report analysis, the just released durable goods data shows weakening business spending. Here are the details:
  • Headline durable orders came at -6.1% vs. -4.4% consensus.
  • Durable orders ex-transportation came at -0.3% vs. 0.3% consensus.
  • Durable goods is a volatile series but worth watching.  In The Arora Report analysis, if durable orders continue to weaken, this will argue against the prevailing consensus of no landing.
• Consumer confidence will be released at 10am ET. Usually, consumer confidence is market moving. However, today it may not, due to the AI frenzy.
• The Treasury will be auctioning seven year notes today. Investors will be carefully watching the auction results. More important will be how the stock market reacts if the auction is not well received. If the stock market moves based on the auction results, that will be an indication that the AI frenzy might be cooling.
• Month end window dressing is taking place. It is primarily leading to money managers buying AI stocks.
• As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.  Please scroll down to see the protection band.

Layoffs

Sony Group Corp SONY is laying off 8% of workers in its PlayStation division.

Expedia Group Inc EXPE is laying off 1,500 workers.

Home Prices

Home prices continue to be strong. Case-Shiller Home Price Index came at 6.1% vs. 6.0% consensus.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Alphabet Inc Class C GOOG and Tesla Inc TSLA.

In the early trade, money flows are neutral in Apple Inc AAPL, Amazon.com, Inc. AMZN, Meta Platforms Inc META, and Microsoft Corp MSFT.

In the early trade, money flows are negative in NVIDIA Corp NVDA.

In the early trade, money flows are mixed in SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust Series 1 QQQ.

Momo Crowd And Smart Money In Stocks

The momo crowd is buying stocks in the early trade. Smart money is inactive in the early trade.

Gold

The momo crowd is buying gold in the early trade. Smart money is inactive in the early trade.

For longer-term, please see gold and silver ratings.

The most popular ETF for gold is SPDR Gold Trust GLD. The most popular ETF for silver is iShares Silver Trust SLV. 

Oil

The momo crowd is aggressively buying oil in the early trade. Smart money is inactive in the early trade.

For longer-term, please see oil ratings.

The most popular ETF for oil is United States Oil ETF USO.

Bitcoin

Bitcoin BTC/USD is breaking out. For details see above.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.

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.

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 seven 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 2008 financial crash, the start of a mega bull market in 2009, the COVID crash, the post-COVID bull market, and the 2022 bear market. Please click here to sign up for a free forever Generate Wealth Newsletter.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.