Please click here for an enlarged chart of SPDR Gold Trust (NYSE:GLD).
Note the following:
– The chart shows the our signal to take partial profits on gold. We have been bullish on gold from the cycle low near $1000. We have been advocating 5% – 8% allocation to gold.
– The chart shows when our blow-off top signal was first given. The signal was subsequently repeated.
– The chart shows that since our blow-off top signal, gold has experienced the worst sell off in 12 years.
– Prior to the blow-off top, gold ETF (GLD) saw the highest option activity on record.
– A large portion of the buying in gold after it crossed $4000 is coming from the meme crowd. All of a sudden, a large number of meme gurus have appeared claiming to be experts in gold. In a sign of the times, the meme crowd is more than happy to wager its hard earned dollars on the advice of newly minted gold meme gurus.
– This time, there is a new element of extremely aggressive meme crowd call buying. This call buying created a gamma squeeze.
– We are now modeling this meme crowd behavior and incorporating it in our gold model.
– Investors need to differentiate between strategic and tactical signals. Our blow-off top signal was a tactical signal to take partial profits. The strategic signal remains unchanged that the next target for gold is $6000 and gold has a path to $10K.
– Investors are eagerly awaiting inflation data tomorrow.
– So far, earnings this season are coming out better than the consensus but inline with whisper numbers. In the long run, earnings are the single best determinant of where the stock market goes. Among important earnings, Netflix Inc (NASDAQ:NFLX) earnings were disappointing. Investors are eagerly awaiting Tesla Inc (NASDAQ:TSLA) and IBM Common Stock (NYSE:IBM) earnings after the close. Tesla earnings will have a notable impact on market sentiment.
– After the sentiment among the momo crowd being extremely positive for a long time, the momo crowd sentiment has swung to negative quickly in the matter of a couple of days. The reason is many momo accounts have been buying larger and larger quantities of call options in speculative stocks. In a matter of days, many such accounts are now decimated. As of this writing, the following illustrates the point:
– Space stock AST SpaceMobile Inc (NASDAQ:ASTS) stock has fallen 30.3% from its high.
– Nuclear stock Oklo Inc (NYSE:OKLO) is down 30.9% from its high.
– Data center stock IREN Ltd (NASDAQ:IREN) has fallen 28.0% from its high.
– Quantum computing stock Rigetti Computing Inc (NASDAQ:RGTI) is down 33.3% from its high.
– All investors should pay attention to sentiment, especially momo crowd sentiment.. The momo crowd sentiment has played a huge role in the rise of the stock market since the April Liberation Day low.
– Even though momo crowd sentiment has swung negative over the last couple of days, according to our proprietary indicators, overall sentiment remains in the extreme positive zone. It is worth repeating that the time to aggressively buy is when sentiment is extremely negative, and the time to hedge is when sentiment is extremely positive. Note that sentiment is not a precise timing tool. Extreme positive sentiment can sustain for months or longer. Prior to the 2000 dot com crash, extreme positive sentiment sustained for over two years.
– Sentiment among the meme crowd is exuberant this morning as they run up Beyond Meat Inc (NASDAQ:BYND), 1-800-Flowers.Com Inc (NASDAQ:FLWS), and Krispy Kreme Inc (NASDAQ:DNUT) with their own extremely aggressive buying. Adding to the buying is a short squeeze.
Magnificent Seven Money Flows
Most portfolios are now heavily concentrated in the Mag 7 stocks. For this reason, It is important to pay attention to early money flows in the Mag 7 stocks on a daily basis.
In the early trade, money flows are positive in Alphabet Inc Class C (NASDAQ:GOOG) and Microsoft Corp (NASDAQ:MSFT).
In the early trade, money flows are neutral in NVIDIA Corp (NASDAQ:NVDA) and Tesla Inc (NASDAQ:TSLA).
In the early trade, money flows are negative in Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms Inc (NASDAQ:META), and Apple Inc (NASDAQ:AAPL).
In the early trade, money flows are neutral in SPDR S&P 500 ETF Trust (NYSE:SPY) and negative in 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 (NYSE:USO).
Oil
Buying is coming in oil on the prospect of India reducing or stopping its purchase of Russian oil to get in President Trump’s good graces. India buys 38% of Russia’s oil.
API crude inventories came at a draw of 2.98M barrels vs. a consensus of a build of 3.524M barrels.
Bitcoin
Bitcoin (CRYPTO: BTC) is range bound.
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.
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