Prudent Investors Pay Attention To The Extraordinary Treasuries' Move – Momo Obliviously Buys Stocks

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

Extraordinary Move In Treasuries

Please click here for an enlarged chart of 20+ year Treasury bond ETF TLT.

Note the following:

• The chart shows that TLT has fallen below the support/resistance zone. This prior support zone has now become a resistance zone.
• The chart shows that after a breakdown below the zone, Treasuries have continued to fall.
• The chart shows a downward sloping trendline and a significant move lower away from the trendline.
• The chart shows that the down move is on heavy volume. This indicates conviction.
• Historically, at a time of geopolitical tension, money rushes into U.S. Treasuries, and U.S. Treasuries rocket up. Based on history, on Iran attacking Israel, U.S. Treasuries should have moved up. But as the chart shows, Treasuries have continued to move down.
• In The Arora Report analysis, Treasuries moving down in spite of the Iranian attack on Israel is quite extraordinary. 
• Prudent investors pay attention when something extraordinary happens in the markets.  
• Lower Treasuries mean lower stock valuations. All investors should fully grasp this point.  
• As is their pattern, the momo crowd is oblivious to this extraordinary development and is buying stocks. The momo crowd’s buy the dip without analysis mentality is on full display.
• Fed Chair Powell has been itching to cut interest rates. Clearly, the bond market is not only defying him, but it is telling him he is wrong. Powell will be participating in a Q&A. We will be paying close attention to what he says.
• San Francisco Fed President Mary Daly is saying there is no urgency to cut rates.
• Wall Street seems to be coming around. A major bank is accepting the real risk of a rate hike. Of course, members and readers of The Arora Report, already knew in advance that the data could force the Fed’s hand to raise rates at a time when everyone expects rate cuts.
• Lower Treasury bonds mean higher yields in the U.S. Higher yields mean a higher dollar.
• Central Banks of China, India, and Indonesia intervened in the forex market to defend their currencies against the dollar.  

International Monetary Fund (IMF)

IMF is warning the U.S. on excessive spending and ballooning debt. IMF is also increasing its forecast of global growth in 2024 to 3.2% from 3.1%.

Housing Slows

After a breakneck pace, new home construction is finally slowing. Here are the details:

• March housing starts came at 1.321M vs. 1.485M consensus.
• March building permits came at 1.458M vs. 1.518M consensus.

China – Beneath The Surface

China GDP growth beat the consensus. In The Arora Report analysis, looking beneath the surface, there is weakness. Here are the details:

• GDP came at 5.3% year-over-year vs. 4.8% consensus.
• March Industrial Production came at 4.5% year-over-year vs. 6.0% consensus.
• March Retail Sales came at 3.1% year-over-year vs. 5.1% consensus.

Magnificent Seven Money Flows

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

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

In the early trade, money flows are negative in Tesla Inc TSLA.

In the early trade, money flows are mixed 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 inactive in the early trade.

Gold

The momo crowd is selling gold in the early trade. Smart money is inactive 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

The momo crowd is selling oil in the early trade. Smart money is inactive 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 halving is projected to be on April 19.  So far, whales have been very successful in using the halving as a pump to get mom and pop excited to buy bitcoin over $70,000 while whales themselves took profits.

Bitcoin is trading around $63,000 as of this writing.  

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.

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.

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 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.