Indian Missiles Hit Pakistan, Buying On U.S.-China Talks, Will The Fed Bow To Trump?

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

Gold As An Early Indicator

Please click here for an enlarged chart of gold ETF SPDR Gold Trust GLD.

Note the following:

• Here are the four major issues the market is facing today:
  • Indian missiles hit Pakistan. This is critical because both countries are heavily armed with nuclear weapons.
  • Formal talks between the U.S. and China are set to begin this weekend.  Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are scheduled to meet with Chinese Vice Premier He Lifeng in Switzerland.
  • The Fed will announce its rate decision at 2pm ET, followed by Fed Chair Powell's press conference at 2:30pm ET.
  • China is taking steps to replace the dollar with the yuan as the anchor of Asian currencies.
• The chart is useful as an early indicator for prudent investors on the four major issues of the day.  The chart reflects the collective wisdom of investors across the globe. In our decades of experience in the markets, the collective wisdom is not always correct.  Nonetheless, it is important to pay attention to it as it provides clues about investor positioning.  Understanding investor positioning gives you a big edge. 
• The chart of gold ETF shows that even after Indian missile strikes on Pakistan in retaliation for a terrorist attack in India, gold is not rocketing.  This indicates that the market believes the situation will deescalate.
• The chart of gold ETF shows that gold is not collapsing, even after the news of formal trade talks between the U.S. and China.  This indicates that the market believes that in spite of positive headlines, the probability of trade talks producing more than what is already discounted in the markets is low.  In our analysis, after the rally, the stock market is already discounting a substantial reduction in China tariffs.
• The chart of gold ETF shows that the Fed is not likely to cut interest rates.  Gold tends to move up ahead of interest rate cuts.  Gold as an early indicator is saying that the Fed is not likely to bow to Trump by cutting interest rates today.
• Regarding China's attack on the dollar, the People's Bank of China bought gold for the sixth month in a row.  The chart of gold ETF shows that this news is not moving gold higher.  This indicates that in the short term, Chinese efforts to attack the dollar are already discounted in the markets.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon.com, Inc. (AMZN), Meta Platforms Inc (META), Tesla Inc (TSLA), and Apple Inc (AAPL).

In the early trade, money flows are neutral in Alphabet Inc Class C (GOOG), NVIDIA Corp (NVDA), and Microsoft Corp (MSFT).

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

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).

Today's Best Finance Deals

Bitcoin

Bitcoin is seeing buying.

Arora Protection Band And What To Do Now

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

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.