Important Powell Speech Ahead, Market Mechanics Drove Second Best November For Stocks Since 1980s

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

Powell Speech Ahead

Please click here for a chart of iShares 20 Plus Year Treasury Bond ETF TLT.

Note the following:

• The chart shows that bonds have made an aggressive move from the lows.
• The chart shows the upward sloping trendline indicating the steadiness of the move up.
• The chart shows that bonds have now reached the lower resistance zone.
• In The Arora Report analysis, prudent investors should watch if bonds break above the lower resistance zone. If they do, it will be a trigger for another leg up in the stock market.
• The stock market has just posted the second best November since the 1980s.
• The up move in the stock market was triggered by rising bonds as shown on the chart, but the move was amplified by market mechanics.
• Market mechanics are very powerful. About two thirds of the up move in November is due to market mechanics. The Arora Report call of market mechanics being to the upside driving the market substantially higher that was made at the beginning of the move has proven spot on.  
• All investors should consider taking time to learn about market mechanics. Learning about market mechanics will help you extract significantly more money out of the markets. Due to their high value, Wall Street professionals keep market mechanics close to their chest. The best way to get access to Wall Street secrets is to listen to the podcasts in Arora Ambassador Club.  Arora Ambassador Club has several podcasts on market mechanics and more will be coming.
• Powell is speaking in Atlanta today. Prudent investors should watch to see if Powell pushes back on the stock market’s aggressive projections of rate cuts. If Powell endorses the stock market’s projections, expect a rip roaring rally. If Powell strongly contradicts Wall Street’s projections, expect a pullback.
• ISM Manufacturing Index will be released at 10am. This data has the potential to move the stock market.
• 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.

Blind Money And Month End Buying

This morning, there are crosscurrents between month end buying and front running blind money.

• There was aggressive month end buying at the close yesterday.
• Some of that is being given back this morning. This is negative.
• On the positive side, Wall Street is front running blind money. Wall Street hopes to buy stocks now and sell them to blind money at higher prices. Blind money is the money that blindly flows into the stock market on the first two days of the month without any analysis and irrespective of market conditions.

Magnificent Seven Money Flows

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

The momo crowd is buying stocks in the early trade. Smart money is 🔒 in the early trade.

Gold

The momo crowd is buying gold in the early trade. Smart money is 🔒 in the early trade.

For longer-term, please see gold and silver ratings.

The most popular ETF for gold is SPDR Gold Trust GLD. The most popular ETF for silver is iShares Silver Trust SLV. 

Oil

There is significant confusion about what OPEC+ is doing.

The momo crowd is like a yoyo in oil in the early trade. Smart money is 🔒 in the early trade.

For longer-term, please see oil ratings.

The most popular ETF for oil is United States Oil ETF USO.

Bitcoin

Bitcoin BTC/USD is range bound with a positive bias. Crypto bulls are hoping that whales will take advantage of low liquidity over the weekend and drive bitcoin above $40,000.  A move above $40,000 will suck in more retail investors.

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.