Momo Crowd Buys Stocks On China Hopium And Zone 1 Magnet Ignoring Rise In Yields; Silver Breaks Out

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

China Hopium

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 the stock market is approaching the low band of zone 1 (resistance).
• Zone 1 is the magnet for traders.
• US China trade talks are continuing in London today.  President Trump said the talks are very far advanced.
• The momo crowd is aggressively buying stocks on hopium about China trade talks, the attraction of the zone 1 magnet, and the weekend pump.  Retail investors are especially vulnerable to the weekend pump and buy on Monday mornings.
• Prudent investors will be closely watching Treasury auctions this week as 30-year Treasury yields are near 5%.  Demand was weak at the previous 20-year Treasury auction.
• This morning, yields are rising.
• President Trump is thinking about the next Fed Chair and the name of the next Fed Chair nominee is coming out very soon, according to President Trump.
• President Trump wants Fed Chair Powell to cut interest rates by 100 basis points.
• Even though the momo crowd is oblivious, prudent investors should pay attention to rising yields, pressure by President Trump on Fed Chair Powell, and Treasury auctions.  Learning to interpret Treasury auctions can give investors an edge.
• Apple Inc.’s (AAPL) Worldwide Developers Conference (WWDC) starts today.  Apple has been lagging behind in AI and has yet to deliver many of the Apple Intelligence features hyped at WWDC last year.  Investors are not expecting big news at WWDC this week.
  • Developers are hoping for news about Apple's on-device, small AI models that would be faster than current cloud based AI models.  However, the useful applications at this point will likely be limited as the on-device models are not yet sufficiently powerful.
  • Investors may remember how Apple extremely aggressively bought its own stock when AAPL stock fell on disappointment over the last WWDC.  Apple's own buying produced a major run in AAPL stock.  Will Apple do a repeat this year?
• Silver has broken out.  As full disclosure, there are nice profits on Silver ETF iShares Silver Trust SLV in our ZYX Buy Core Model Portfolio.  A new signal may be given on silver for a trade around position.  Trade around positions are a billionaire and hedge fund technique to increase returns while dramatically reducing risks.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon.com, Inc. (AMZN), NVIDIA Corp (NVDA), Alphabet Inc Class C (GOOG), and Apple (AAPL).

In the early trade, money flows are neutral in Meta Platforms Inc (META).

In the early trade, money flows are negative in Microsoft Corp (MSFT) and Tesla Inc (TSLA).

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

Momo Crowd And Smart Money In Stocks

Today's Best Finance Deals

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).

Bitcoin

Bitcoin BTC/USD 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.

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.