Harris Or Trump – Defense Stocks Are Winning, Tech Battle, Personal Income Drops, Trump Crypto Push

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

Defense Stocks Winning

Please click here for an enlarged chart of Rtx Corp RTX.

Note the following:

• This article is about the big picture, not an individual stock.  The chart of RTX stock is being used to illustrate the point.
• The market is reaching a consensus that defense stocks are winners irrespective of Trump or Harris winning the election.  The consensus is that defense spending is going to go up irrespective of who wins.
• RTX is an aerospace and defense stock.  RTX makes the Patriot anti-missile defense system.
• The chart shows that RTX stock has broken out after reporting earnings better than the consensus.
• The chart shows Arora buy zones giving readers of The Arora Report opportunities to buy RTX at great prices.
• As full disclosure, there is an RTX position in the Core Model Portfolio in The Arora Report's ZYX Buy.  There is also a trade around position on RTX.  Trade around positions are a billionaire and hedge fund technique used to maximize risk adjusted returns. 
• The chart shows that a signal was given to take partial profits on the trade around position to take advantage of the strength.
• As full disclosure, The Arora Report will be updating the buy zone and Buy Now rating on RTX for investors who do not own the stock.
• RSI on the chart shows that RTX is overbought in the very short term.
• Other defense stocks such as Lockheed Martin Corp LMT and L3Harris Technologies Inc LHX are also reporting earnings better than the consensus.  Technically, LMT has broken out.  A signal may be given on LMT if it pulls back.
• For those interested in ETFs, iShares US Aerospace & Defense ETF ITA is also attempting a breakout.  As full disclosure, ITA is in The Arora Report's ZYX Allocation Model Portfolio.
• In The Arora Report analysis, all investors should consider some allocation to the defense and aerospace sector.
• The battle around tech stocks, especially AI stocks, continues. Many investors are selling AI stocks and rotating into small cap stocks; other investors are taking advantage of the dip in AI stocks and aggressively buying. Prudent investors should consider using buy zones and Buy Now ratings.
• As full disclosure, iShares Russell 2000 ETF IWM, as well as micro cap closed end fund (RMT), are in The Arora Report's ZYX Allocation Model Portfolio.
• In The Arora Report analysis, Trump is good for small caps but Harris is not.  
• PCE is the Fed's favorite inflation gauge.  The just released data came as expected.  Here are the details:
  • PCE came at 0.1% vs. 0.1% consensus.
  • Core PCE came at 0.2% vs. 0.2% consensus.
• The U.S. economy is 70% consumer based.  For this reason, prudent investors pay attention to personal income and personal spending.  The consumer continues to spend but income may be becoming a problem.  Here are the details of the new personal income and spending data:
  • Personal income came at 0.2% vs. 0.4% consensus.
  • Personal spending came at 0.3% vs. 0.3% consensus.
• In the early trade, the market is volatile on the momo crowd aggressively buying tech stocks, especially AI stocks.  However, the up spikes are being met with selling.

Magnificent Seven Money Flows

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

In the early trade, money flows are neutral in Microsoft Corp MSFT.

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

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust SPY and 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 BTC/USD is seeing aggressive buying on expectations that Trump will announce a U.S. strategic reserve for bitcoin.  Trump will deliver the keynote speech at a bitcoin conference on Saturday. 

We previously shared with you that Trump has apparently invited investors to a private bitcoin related fundraiser where the admission fee for bitcoin investors is $845,000 per person.  Trump has already raised more than $4M in cryptocurrencies.

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 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.

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