Attention To Silver Breakout – Dollar Demand Surges On Trump Election Prospects

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

Silver And Dollar Contradiction

Please click here for an enlarged chart of iShares Silver Trust SLV.

Note the following:

• The chart is a monthly chart to give you a long term picture.
• The chart shows that silver has broken out from a long base.
• The chart shows an Arora signal for a SLV trade around position. As full disclosure, The Arora Report gave a signal to exit the SLV trade around position this morning.  A trade around position is a billionaire and hedge fund technique that can dramatically increase profits and reduce risks.
• The chart shows that the prior resistance zone has now become the support zone.
• The chart shows the trader magnet.  Note the price of the trader magnet.  This indicates that if the momentum builds, there may be very large gains ahead.
• The chart shows that the trader magnet is exactly the point where The Arora Report gave a sell signal in 2011.
• The Arora call to sell silver came exactly on the same day that silver topped. At that time, almost everyone was extremely bullish on silver, and analysts were given a target of $100. The Arora call was an extreme contrary call that was later proven spot on. On the same day that silver topped, there was also an Arora call to short sell silver with a target of a 33% drop in a matter of weeks.
• The chart shows that the silver rally in 2020 failed.  The reason the rally failed was that it was driven almost entirely by two factors:
  • Meme crowd
  • Short squeeze
• In The Arora Report analysis, there is a fair probability of another short squeeze and another meme crowd run.  
• The chart shows The Arora Report call to backup the truck and buy silver just before silver took off in 2011.  The Arora backup the truck and buy signal was given when silver futures were in the $17 range.  Silver futures quickly shot up to $50 when the sell signal was given.
• The Arora Report buy zones change. The chart shows one of the more recent silver Arora buy zones.
• Demand for the dollar is surging on the prospect of Trump being elected.  In The Arora Report analysis, there is an important contradiction.  Silver is priced in dollars.  Normally, when the dollar demand goes up, the price of silver falls.  Recently, the price of silver has been rising along with demand for the dollar – this is defying common sense.  The reason is that the momo crowd is so drunk on the momentum and the breakout that they are oblivious to the macro that impacts silver.  It is important that investors do a 360 degree analysis, and not just rely on momentum.    
• In The Arora Report analysis, there is a good probability of selling coming into silver right around here.
• Ten year Treasury yield has reached 4.24% as of this writing in the premarket.  As we shared with readers yesterday, when the yield crosses 4.25%, it will start catching smart money's attention.  This is exactly what is happening today, and it is bringing selling into the stock market. 
• Prudent investors should note that 1995 was the last time yields rose after the Fed cut interest rates.  At that time, Alan Greenspan was the Fed chair.  There are parallels to what is happening now.
• Investors should also note that yesterday, volume in the stock market was very low.  This indicates a lack of conviction in stocks running up from here even though the talk is that S&P 500 is about to hit 6000.  It is more important for investors to pay attention to the walk, not the talk. It is common for large investors to pump up the stock market in the media only to sell their positions into the strength. 

Magnificent Seven Money Flows

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

In the early trade, money flows are neutral in Alphabet Inc Class C GOOG and Meta Platforms Inc META.

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

In the early trade, money flows are negative 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 range bound.

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.