Yellen Declares Victory - Stock Market Cheers, Key Week For Bitcoin

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

Premature Victory

Please click here for a 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 stock market is consolidating below the resistance zone but above the mini support zone.
• RSI on the chart shows that the stock market is oversold in the very short term. Oversold markets tend to bounce.
• Consider not paying attention to Dow Jones Industrial Average (DJIA) as represented by ETF SPDR Dow Jones Industrial Average ETF Trust DIA and instead focusing on S&P 500.  The reason is that Boeing Co BA, a stock in DJIA, is down about 7% as of this writing in the premarket. BA stock is down due to an Alaska Air Group, Inc. ALK plane 737 Max-9 experiencing a blowout incident with a door plug.
• Treasury Secretary Yellen has declared victory. She tweeted, “The American people, workers, and businesses have helped put us on a path to a soft landing.  @POTUS’s economic agenda is giving them the tools they need to grow the economy, including historic investments in infrastructure, clean technology, and semiconductors.”
• In The Arora Report analysis, Yellen is premature. The reason is the 40 year history of recessions that we have deeply studied. It is important for investors to understand how recession occurs and how every single time, a vast majority of investors are blindsided and lose money. To help those wanting next level knowledge, we are preparing a podcast.  The podcast will be available in the Arora Ambassador Club.  
• There are two important conferences that will impact several stocks and may impact the overall stock market.
  • Consumer Electronics Show is taking place in Las Vegas. This time, the focus is on artificial intelligence.
  • JPMorgan Chase & Co JPM Healthcare Conference is taking place in San Francisco.
  • The Arora Report will be keeping track of presentations in both conferences and provide signals if they are triggered. Buy signals will be in ZYX Buy, and short signals will be in ZYX Short.  In the event a new major trend emerges, there may be a signal in ZYX Allocation.
• As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band.

India

The First Advance Estimate of India’s GDP growth is 7.3% in the current fiscal year. This is slightly higher than 7.2% consensus. This puts India as the fastest growing large economy in the world.

ZYX Emerging has continuously covered India for 16 years. There are two India ETFs in ZYX Emerging Model Portfolio. India is the best large economy growth story for the long term.  India small cap iShares MSCI India Small-Cap ETF SMIN is in ZYX Emerging Specialty ETFs Model Portfolio. Members of ZYX Emerging who scaled into ETF SMIN when it dipped into the Buy Zone in 2023 gained 44% in less than nine months.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Apple Inc AAPL, Amazon.com, Inc. AMZN, Meta Platforms Inc META, Microsoft Corp MSFT, and NVIDIA Corp NVDA.

In the early trade, money flows are negative in Tesla Inc TSLA and Alphabet Inc Class C GOOG.

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

Bitcoin

This is a key week for Bitcoin BTC/USD.  Investors are expecting a bitcoin ETF approval as early as tomorrow.  Here is the key question for investors: Will bitcoin ETF approval be a sell the news event?  There is also a risk that the SEC may not approve a bitcoin ETF. The consensus is that the SEC will approve several bitcoin ETFs at the same time.

Markets

Our very, very short-term early stock market indicator is 🔒. This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding 🔒 in cash or Treasury bills or allocated to short-term tactical trades; and short to medium-term hedges of 🔒, and short term hedges of 🔒. 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.

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 seven 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 2008 financial crash, the start of a mega bull market in 2009, the COVID crash, the post-COVID bull market, and the 2022 bear market.  Please click here to sign up for a free forever Generate Wealth Newsletter.

This article is from an external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.