Fate Of Nasdaq 100 Depends On Just Five Earnings This Week, Oil Falls On Israel Attack On Iran

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

Fate Of Nasdaq 100

Please click here for an enlarged chart of Invesco QQQ Trust Series 1 QQQ.

Note the following:

• The chart shows that QQQ is in the resistance zone.  As a reference, S&P 500 has broken out, but QQQ has lagged.
• QQQ is dominated by the Magnificent Seven stocks.  Five of the Magnificent Seven stocks are reporting earnings this week: Apple Inc AAPL, Amazon.com, Inc. AMZN, Alphabet Inc Class C GOOG, Meta Platforms Inc META, and Microsoft Corp MSFT
• RSI on the chart shows that it is easy for QQQ to break out.  All it needs is a little spark from big tech earnings.
• This is the busiest earnings week.  About one half of S&P 500 companies are reporting this week.  To date, about 75% of the companies have reported above consensus. This is slightly below the five year average of 77%.
• The stock market is front running the election.  The historical pattern is for the stock market to run up after the election.  However, since the market has been front running the election this year, the historical pattern may not be as strong or may not even hold this year.
• In the early trade this morning, there is aggressive momo crowd buying as the momentum from front running the election continues.

Japan

Japan's ruling party has lost its parliamentary majority.

• The yen is falling against the dollar.
• Long term Japanese government bonds are falling.
• Japanese stocks are rising on a weaker yen because Japan's economy is export oriented.

In The Arora Report analysis, the drop in yen may force the Bank of Japan's (BOJ) hand to intervene by buying yen or by raising interest rates.  From a long term perspective, the yen is very undervalued. 

Magnificent Seven Money Flows

In the early trade, money flows are positive in NVIDIA Corp NVDA, Tesla Inc TSLA, AMZN, MSFT, GOOG, META, and AAPL.

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust SPY and Nasdaq 100 ETF (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

Buying in Bitcoin BTC/USD continues on increasing prospects of a Trump win.  Trump is the recipient of very large campaign contributions from the crypto industry.

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.