Aggressive Stock Buying

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

Note the following:

• The chart shows the stock market was falling rapidly when we wrote the FAA was cutting flights and this would put pressure on both sides to reach an agreement and reopen the government.
• The chart shows our call that stocks can rip higher on the prospect of the government reopening. This call was made when stocks were being aggressively sold, as shown on the chart.
• Only a few hours later, the chart shows the stock market turned on rumors that the government would reopen.
• The chart shows the stock market took another leg up on a media report that the government would reopen.
• The chart shows aggressive buying in the stock market in the early trade today on optimism that the government will reopen soon.
• The VUD indicator is the most sensitive measure of net supply and demand in real-time. The orange represents net supply and the green represents net demand. The VUD indicator has turned orange, indicating net supply of stocks. This shows that underneath the euphoric buying there is a net supply of stocks.
• Here is a noteworthy market behavior that is typical of bull markets.
• Sales data from Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM) is important. TSM manufactures NVIDIA Corp (NASDAQ:NVDA) and Advanced Micro Devices Inc (NASDAQ:AMD) chips. The momentum of revenue increases is slowing at TSM. This should concern prudent investors about the AI trade. However, in the euphoria of the government potentially reopening, no one is paying attention this morning. Here are the details:
• There is a contrasting behavior between the stock market and gold this morning. Expectations in the market were that gold would fall when the government reopened. These expectations made sense because gold is bought when uncertainty rises, and the government reopening reduces uncertainty. However, gold is surging. The reason is the government opening means the government will be spending recklessly, adding to the national debt.

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 **Apple Inc **(NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), **Microsoft Corp **(NASDAQ:MSFT), Tesla Inc (NASDAQ:TSLA), and Nvidia (NVDA).

In the early trade, money flows are positive in S&P 500 ETF (SPY) and 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 (NYSE: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 (CRYPTO: BTC) is seeing buying.

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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