Pull Of Stock Market Magnet Stronger Than Musk Calling Trump's Budget A "Disgusting Abomination"

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

Stock Market Magnet

Please click here for an enlarged chart of SPDR S&P 500 ETF Trust SPY which represents the benchmark stock market index S&P 500 (SPX).

Note the following:

• The chart shows that the pull of zone 1 as the stock market's magnet is very strong.
• The chart shows that RSI has now become barely overbought.  This indicates that there is room for the stock market to move to zone 1, but the stock market can also pull back due to overbought conditions.
• Elon Musk is calling President Trump's budget a "disgusting abomination."  Musk says, "Congress is making America bankrupt." Musk claims that President Trump's "One Big Beautiful Bill" will massively increase the budget deficit to $2.5T.
  • The momo crowd buys Tesla Inc (TSLA) stock on every comment from Musk.  How is the momo crowd reacting to Musk's comment about President Trump's budget?  The momo crowd is aggressively buying stocks as the pull of the zone 1 magnet in the stock market is much stronger than Musk's influence.
  • Prudent investors should pay attention to Musk's comment about President Trump's budget.  After all, Musk spent $250M of his own money to get Trump elected and countless hours in Washington on DOGE to help President Trump.
• President Trump said, "I like President XI of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!"
  • How does the momo crowd react to President Trump's statement?  The momo crowd is buying stocks because President Trump likes President Xi, and they are ignoring President Trump saying that President Xi is extremely hard to make a deal with.
  • Prudent investors should not ignore half of President Trump's statement.
• Automatic Data Processing Inc (ADP) is the largest private payroll processor in the country.   ADP data poured cold water on all the bullishness.  ADP showed employment much weaker than expected.  ADP Employment Change came at 37K vs. 115K consensus.
  • Weak ADP data brought quick selling to the stock market, but as of this writing, the momo crowd is aggressively buying the shallow dip caused by the ADP data.
• ADP data comes after JOLTS data.  JOLTS came at 7.391M vs. 7.2M prior.  JOLTS data contributed to yesterday's stock market rally.
• Initial jobless claims will be released tomorrow at 8:30am ET and the official jobs report will be released Friday at 8:30am ET.
• ISM Services was released today at 10am ET.  ISM Services data can cause major moves in the markets.  ISM Services data is a leading indicator and carries heavy weight in the adaptive ZYX Asset Allocation Model with a long proven track record with inputs in 10 categories.
• The Fed's Beige Book will be released today at 2pm ET and may be market moving.
• There has been significant Fed speak:
  • Dallas Fed President Logan said the Fed should focus on forward looking policy that is prepared for a high inflation era.
  • Fed Governor Cook warned of increasing uncertainty with trade policy potentially pressuring inflation and jobs.
  • Atlanta Fed President Bostic indicated room for one rate cut in 2025.
• For the AI trade,  earnings from Broadcom Inc (AVGO) are important.  Earnings will be released after market close.
• Also important are earnings from Lululemon Athletica Inc (LULU) as it will give a glimpse into the state of the higher end consumer as well as lower end consumers who purchase Lululemon as a status symbol.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Meta Platforms Inc (META) and NVIDIA Corp (NVDA).

In the early trade, money flows are neutral in Amazon.com, Inc. (AMZN), Alphabet Inc Class C (GOOG), Microsoft Corp (MSFT), and TSLA.

In the early trade, money flows are negative in Apple Inc (AAPL).

In the early trade, money flows are like a yoyo in S&P 500 ETF (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).

Latest Startup Investment Opportunities:

Oil

API crude inventories came at a draw of 3.3M barrels vs. a consensus of a draw of 0.9M barrels.  This data is bearish for oil, but new politics will trump any data.

Bitcoin

Bitcoin is range bound.

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.

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.