Palantir And Walmart Inject A Dose Of Reality In Trump Hopium, Yen Rises And Gold Hits New High

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

Dose Of Reality

Please click here for an enlarged chart of AI software company Palantir Technologies Inc (PLTR).

Note the following:

• This article is about the big picture, not an individual stock. The chart of PLTR stock is being used to illustrate the point.
• The stock market has been running up on Trump hopium.  This morning, Palantir and Walmart Inc (WMT) are injecting a dose of reality.
• The chart shows a big drop in PLTR stock and the Arora signal to take partial profits.
• The chart shows when the core PLTR position was bought.  As full disclosure, PLTR is in The Arora Report’s Core Model Portfolio in ZYX Buy.
• As full disclosure, The Arora Report has also recently given signals to take partial profits on very profitable positions in aerospace and defense ETF iShares US Aerospace & Defense ETF (ITA) as well as on aerospace and defense stock Rtx Corp (RTX).
• The trigger for the signals on defense stocks is President Trump's plan to cut 8% from the defense budget over each of the next five years.  In 2013, when a similar cut occurred in one year, the long term contracts for new weapons were protected.  The burden of the cuts mostly fell on highly trained personnel losing their jobs and other programs such as reducing flight training hours.  It is not clear how Trump will make the cuts.  For certain, programs such as DEI and climate change will be eliminated, but the savings from them will simply be a drop in the bucket.
• Walmart is the largest retailer.  Walmart is guiding lower.  The real cause of lower guidance appears to be the uncertainty caused by Trump's election.  As full disclosure, WMT stock is in The Arora Report’s ZYX Buy Core Model Portfolio.
• University of Michigan consumer sentiment will be released tomorrow at 8:30 am ET.  At The Arora Report, we will be very carefully scrutinizing this data after the lower guidance from Walmart.
• The FOMC minutes are hawkish.  The Fed is content with not cutting rates any further for the time being.  Hawkish Fed minutes stopped the stock market rally in its tracks yesterday afternoon.  Normally, with the present positioning, the stock market would have experienced a significant drop on these hawkish Fed minutes.  However, momo gurus have successfully sold the narrative that inflation, interest rates, and the economy do not matter anymore due to their faith in Trump.
• Gold is hitting a fresh high. 
• Initial jobless claims came at 219K vs. 217K consensus.  This indicates that the overall jobs picture remains strong.  The layoffs are primarily in information technology.
• Leading indicators will be released today at 10 am ET and may be market moving.  The consensus is 0.0%.

Japan

The yen is rising on the belief that the Bank of Japan (BOJ) will soon raise interest rates.  Prudent investors need to keep an eye on the yen as it impacts the carry trade. Remember what happened in August 2024 when the yen rose – the U.S. stock market experienced a big drop.  As full disclosure, The Arora Report has a position in yen ETF Invesco CurrencyShares Japanese Yen Trust (FXY) in The Arora Report’s ZYX Allocation Model Portfolio.  

Magnificent Seven Money Flows

In the early trade, money flows are positive in Microsoft Corp (MSFT), NVIDIA Corp (NVDA), and Tesla Inc (TSLA).

In the early trade, money flows are neutral in Alphabet Inc Class C (GOOG).

In the early trade, money flows are negative in Apple Inc (AAPL), Amazon.com, Inc. (AMZN), and Meta Platforms Inc (META).

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 is range bound.

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.