Scale In On Trump Hopium Dips – Watch Nvidia As An Indicator, Big China Stimulus

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

Nvidia As An Indicator

Please click here for an enlarged chart of NVIDIA Corp NVDA.

Note the following:

• This article is about the big picture, not an individual stock.  The chart of NVDA stock is being used to illustrate the point.
• The chart shows that NVDA has broken out.
• RSI on the chart shows that NVDA has room to run.
• Nvidia will report earnings on Nov. 20 after the market close.  Historically, NVDA stocks sees heavy buying before earnings. As full disclosure, in addition to the core position in NVDA, which is long from $12.55, The Arora Report also has a trade around position in NVDA in The Arora Report’s ZYX Buy.
• The chart shows the top support zone.  This top support zone is very significant as an indicator for the entire market, not just NVDA stock.
• For the time being, as a simple short cut, investors can use Nvidia as an indicator.  As long as NVDA stock does not break below the top support zone, investors' stance towards the stock market should be bullish.  The short cut is helpful but consider relying on the highly sophisticated, adaptive, ZYX Asset Allocation Model with inputs in 10 categories.
• The Arora Report call is to scale in by buying stocks and ETF's, not just NVDA, as they dip in the buy zones until a time when Trump hopium comes close to meeting reality.
• In The Arora Report analysis, the time to take profits will be just before the Trump hopium comes close to meeting reality.  
• The stock market is moving based on the difference between Wall Street positioning going into the election and the election result.  In The Arora Report analysis, the main cause of the rip roaring rally after the election is two-fold:
  • Wall Street was not positioned for the margin of Trump's victory.
  • Wall Street was not positioned for a potential red sweep.  As of this writing, there is a high probability of a red sweep, but it is not yet confirmed.  A red sweep will take place if Republicans take control of the House.
• Based on anecdotal evidence, it is difficult for many investors to put their arms around the current rally and The Arora Report's call to buy the dips. 
• In the early trade, the Trump rally is taking a breather for two reasons:
  • Investors' disappointment from China stimulus first impacted Asian markets, then moved to Europe, and now to the U.S.  See the section below for details.
  • In the very very short term, the stock market is overbought.
• The University of Michigan Consumer Sentiment – Prelim will be released at 10am ET.  It may be market moving.
• In The Arora Report analysis, consumer sentiment has moved up significantly after Trump's election.   

Big China Stimulus

China has announced a big stimulus of $1.4T.  The stimulus will provide swaps for debt ridden local governments' off balance sheet liabilities.  The size of the stimulus is greater than the consensus.  For this reason, it should have been positive, but in The Arora Report analysis, investors are reacting negatively because the stimulus did not include any fiscal measures to boost the economy.  

Magnificent Seven Money Flows

In the early trade, money flows are neutral in Apple Inc AAPL and Tesla Inc TSLA.

In the early trade, money flows are negative in Amazon.com, Inc. AMZN, Alphabet Inc Class C GOOG, Meta Platforms Inc META, Microsoft Corp MSFT, and NVDA.

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 being bought on hope that whales will take advantage of low liquidity during the weekend to run bitcoin up over $80,000.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.  The proprietary protection band from The Arora Report is very popular.  The protection band puts all of the data, all of the indicators, all of the news, all of the crosscurrents, all of the models, and all of the analysis in an analytical framework that is easily actionable by investors.

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.