Gold Crosses $3000, Stock Buying On Democrats Blinking And Some Investors Turning Extremely Bearish

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

Gold Hitting New High

Please click here for an enlarged chart of SPDR Gold Trust (GLD).

Note the following:

• The chart of gold ETF is a monthly chart to give you a long term picture.
• The chart shows that gold has moved to a new high.  As of this writing, April gold futures are trading at $3007.
• The chart shows several highly accurate Arora signals on gold.
• The chart also shows when an Arora call triggered a $200 global selloff in gold.  Business Standard, which is like the Wall Street Journal of India, highlighted The Arora Report call.
• RSI on the chart shows that gold is overbought.
• As always, markets have crosscurrents.  The positive in gold is it has broken above $3000.  The negative is that gold is overbought and can pullback.
• As full disclosure, in The Arora Report’s ZYX Allocation, there is a signal on a trade around position in GLD.  In The Arora Report’s ZYX Buy, there are trade around position signals on silver ETF iShares Silver Trust (SLV) and gold miner Newmont Corporation (NEM).
• In the early trade, there is aggressive buying in the stock market on Democrats blinking and allowing the Senate to pass the Republican spending bill.  The government shutdown appears to have been avoided.
• Buying is also coming in based on the results of AAII Sentiment Survey.
  • AAII members are individual investors who tend to be older and not part of the momo crowd. Only 19.1% of AAII members are bullish.  Historically, on the average 37.5% of these investors are bullish. 59.2% of these investors are bearish vs. a historical average of 31.0%.
  • AAII members tend to be extremely pessimistic at market bottoms.  They are a contrary indicator.
  • Long time readers of The Arora Report may recall that on March 9, 2009,  The Arora Report issued a signal to back up the truck and buy stocks.  The protection band was at 0%.  With the benefit of hindsight, March 9, 2009 turned out to be the start of a long bull market.  At that time, AAII members were extremely bearish.
• Prudent investors need to understand that the stock market has many groups of investors.  It is important to take into account the groups that move the stock market.  AAII members do not move the stock market.
• In our decades in the markets, we have learned that investors should not act on the AAII survey alone.  A 360 degree analysis is a better approach for high risk adjusted returns.
• Prudent investors should rely on more comprehensive indications of sentiment such as The Arora Report's proprietary sentiment indicator.  Around the market top, we were sharing with you the sentiment was in the extreme positive zone.  Now, on The Arora Report's proprietary indicator sentiment has backed off from extreme positive to positive.  Sentiment is a contrary indicator at extremes. 
• The news from Germany and China is also boosting sentiment in the early trade.  Please see the section below.
• University of Michigan consumer sentiment will be released today at 10am ET.  This is very important data and may be market moving.

Germany

Friedrich Merz, Germany’s Chancellor-in-waiting, has reached an agreement with the Greens on a borrowing package to finance defense and infrastructure spending.

China

Chinese stocks surged on hopes of more government support.  CSI 300 jumped 2.4%.

Magnificent Seven Money Flows

In the early trade, money flows are positive 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 positive 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.