Record $6 Trillion Quad Witching Balances Israel-Iran War In Stock Market, Switzerland Cuts Rates

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

Record Quad Witching

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 has pulled back from the bottom band of zone 1 (resistance).  Zone 1 has been the magnet for traders.
• RSI on the chart shows the stock is neither overbought nor oversold.  RSI on the chart shows internal momentum in the stock market is slowing.
• Quadruple witching is today.  A record $6T notional value of derivatives will expire. In quadruple witching, stock index futures, futures options, stock options, and single stock futures expire.  Quadruple witching often leads to volatility.
• In our analysis, quadruple witching has been exerting upward pressure on the stock market this week.  It may continue to put upward pressure on the stock market today.  
• In our analysis, the upward pressure from quadruple witching is one of the reasons the stock market has been so resilient in the face of the Israel Iran war.  
• Europe and Iran are set to meet today for high level talks, the first since the war started. Europe will make an offer to Tehran that will require Iran ceasing uranium enrichment. There is aggressive stock buying on an unconfirmed rumor that Iran is willing to accept restrictions on uranium enrichment.
• President Trump has indicated that the U.S. will decide to join the war or not "within two weeks."
• An important piece of information for prudent investors comes from satellite images that the media is not highlighting.  Satellite images show that the Israeli attacks on the nuclear facility at Natanz has primarily damaged transformers and the switchyard.  This damage can be quickly repaired. We are not military experts.  Based on our sources, the main reason President Trump may have backed off from bombing Fordow is the satellite images showing the Israeli attacks caused minimal damage to Natanz.  Natanz is not fortified like Fordow.
• Investors need to be very careful about reports in the media. 
• Leading indicators will be released at 10am ET and may be market moving.

Switzerland

On previously flat inflation pushing into the negative, the Swiss National Bank cut interest rates by 25 bps, dropping to 0%.  The decrease in inflation appears to be due to falling prices in oil (before the Israel Iran war started) and tourism.

England

The Bank of England (BOE) announced the interest rate will not change, remaining at 4.25%, as expected.

Magnificent Seven Money Flows

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

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

In the early trade, money flows are negative in S&P 500 ETF (SPY) and positive 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).

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.