Money Flows Out Of Gold Into Bitcoin, Next Bitcoin Stop $100,000, Aggressive Buying In Tesla

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

Trump Trade Rolls On 

Please click here for an enlarged chart of Bitcoin BTC/USD.

Note the following:

• The Arora Report’s call on bitcoin has proven spot on.   On Friday, we wrote:

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.

• The chart shows that bitcoin has moved to $81,866 as of this writing.
• RSI on the chart shows that bitcoin is overbought.  However, in The Arora Report analysis, the RSI pattern shown on the chart is setting up for a higher bitcoin price, perhaps after a shallow pullback.  The next target for bitcoin is $100,000.
• The chart shows the support zone for bitcoin.
• The chart shows that bitcoin broke out on Trump's election.  Trump has said he wants to be the crypto president.  As full disclosure, The Arora Report also gave a signal on Trump's election to buy bitcoin via ETF iShares Bitcoin Trust ETF IBIT.  Bitcoin is also in The Arora Report’s ZYX Allocation Model Portfolio.
• Money is flowing out of gold and other commodities, such as oil, and into cryptos.  For the first time iShares Bitcoin Trust (IBIT) has become bigger than iShares Gold Trust IAU.  On Trump's election, a record $1.4B money inflow took place in IBIT.
• When looking at gold and bitcoin, investors need to understand that the gold market is not being manipulated, while bitcoin can easily be manipulated.  Anytime an asset can be easily manipulated, it can be driven higher than you would think.
• Other crypto tokens are also moving. Dogecoin, created as a joke, has gone up 40% since Friday.  The meme crowd is going all in on smaller coins.
• Sentiment has reached the extreme zone.  When sentiment reaches extreme positive, it is traditionally a sell signal.  However, sentiment is not a precise timing signal.  Also, this time is different because of the momentum from Trump's election.  The Arora Report's sentiment indicator is a 360 degree view and is very comprehensive.  Investors looking for a short cut may at this time look at bitcoin as an indication of sentiment.
• Investors need to understand that this is as pure of a momentum market as it gets.  Momentum is great as long as it is going up.  However, a break in momentum can cause major losses, especially in popular stocks. 
• Based on the weekend pump, there is aggressive buying in stocks by retail investors in the early trade.  Buying is extremely aggressive in Trump stocks, such as Tesla Inc TSLA. TSLA stock is up over 6% in the premarket, after moving up 8.2% on Friday.  Tesla CEO Elon Musk is expected to be the most influential person in Trump's administration, but without an official appointment.
• Trump's election is impacting markets across the globe.  Please see below for examples.

China

There is disappointment in the markets about China's stimulus.

China’s trade surplus is set to hit a record of almost $1T.  Trump is likely to focus on this record. 

India

The Reserve Bank of India is likely to let the Indian currency rupee weaken to compete with the Chinese yuan after Trump's election.

Japan

The Bank of Japan failed to bolster the yen after Trump's election.  The yen has weakened.

Europe

There are reports that Trump and Putin have spoken in a bid to settle the Ukraine war.  Russia is denying the report.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon.com, Inc. AMZN, Alphabet Inc Class C GOOG, NVIDIA Corp NVDA, and Tesla (TSLA).

In the early trade, money flows are neutral in Meta Platforms Inc META and Microsoft Corp MSFT.

In the early trade, money flows are negative in Apple Inc AAPL.

In the early trade, money flows are positive 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 aggressively buying stocks in the early trade.  Smart money is inactive in the early trade.

Note for new members: Smart money often sells into the strength generated by momo crowd buying and buys into the weakness generated by momo crowd selling.  Over a long period of time, investors come out ahead by adopting smart money's ways.  The exception is in a raging bull market – for very short term trades, consider following the momo crowd and not smart money.

Very Very Short-Term Indicator

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

Please see above.

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.