To gain an edge, this is what you need to know today.
Hedge America Trade
Please click here for an enlarged chart of SPDR Gold Trust (NYSE:GLD).
Note the following:
- The chart of GLD is a monthly chart to give you a long term picture.
- The chart shows a parabolic move up in gold.
- The chart shows resistance is at zone 1. Zone 1 is also the magnet for traders.
- Gold is moving up again on the government shutdown.
- In our analysis, gold has become the quintessential hedge America trade. Foreigners do not want to buy U.S. stocks, but to participate in the AI revolution, foreigners have no choice but to buy U.S. stocks. The solution foreigners have found is to hedge their U.S. holdings with gold. Foreigners' main concerns are the $37T debt, continued deficit spending, dysfunction in Washington DC, and tariffs.
- Healthcare subsidies are at the heart of the government shutdown. Here are the key points:
- Some of the subsidies for the Affordable Care Act (ACA) are going to expire at the end of the year.
- The subsidies that are expiring are enhanced subsidies that lower premiums by imposing a cap on premiums as a percentage of income.
- Out of 24.3M people with ACA coverage, 22.4M receive subsidies.
- President Trump says that Democrats want $1T in spending on healthcare over the next 10 years.
- There are also differences between Republicans and Democrats on subsidies for immigrants.
- For investors, our call is to buy if there is a substantial dip in the stock market. The plan is to lower our Protection Band on a 4% – 7% dip in the stock market.
- Expect blind money to flow into the stock market today and tomorrow. Blind money is the money that flows into the stock market on the first two days of the month without any analysis irrespective of market conditions.
- Automatic Data Processing Inc (NASDAQ:ADP) is the largest private payroll processor in the country. ADP uses its data to provide a glimpse of the official jobs report that is scheduled to be released on Friday at 8:30am ET. The official jobs report could be delayed if an agreement is not reached in time. ADP employment change came at -32K vs. +40K consensus. This indicates employment is weakening faster than anticipated.
- A weakening employment picture is consistent with data showing weakening consumer confidence. The Conference Board's Consumer Confidence Index came at 94.2 vs. 96.0 consensus.
- There are always crosscurrents in the markets. JOLTS job openings data was stronger than expected. JOLTS data came at 7.227M vs. 7.2M consensus.
- In our analysis, unless the official jobs report is strong and inflation data is hotter, there is now a 90% probability of a rate cut in October.
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, and rise above the noise of the daily news 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 negative in Apple Inc (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).
In the early trade, money flows are neutral in SPDR S&P 500 ETF Trust (NYSE: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 (GLD). The most popular ETF for silver is iShares Silver Trust (SLV). The most popular ETF for oil is United States Oil ETF (USO).
Oil
API crude inventories came at a draw of 3.674M barrels vs. a previous draw of 3.821M barrels.
Bitcoin
Bitcoin (CRYPTO: BTC) is seeing buying.
What To Do Now
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.
Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
