Nvidia's First Quantum Computing Day, $4.5T Quad Witching, European Banks Beat Tech Stocks By 34%

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

Fed Rethink

Please click here for an enlarged chart comparing Nasdaq 100 ETF Invesco QQQ Trust Series 1 (QQQ) to European financials ETF iShares MSCI Europe Financials ETF (EUFN).

Note the following:

• When 2025 started, investors were rushing headlong to buy tech stocks.  Investors were also selling European financial stocks.
• The chart is an eye popper – the opposite of the prevailing wisdom from early 2025 has happened.  The chart shows in 2025 European financials have outperformed tech stocks, represented by QQQ, by 33.88%.
• As full disclosure, European financial ETF EUFN is in The Arora Report’s ZYX Allocation Model Portfolio.
• The eye popping 33.88% outperformance in less than three months illustrates why investors need to diversify beyond tech stocks.
• Yesterday after the Fed announcement, when the momo crowd was aggressively buying stocks and the stock market was running up fast, we wrote in the Afternoon Capsule:

In The Arora Report analysis, Powell has done a masterful job of comforting the stock market.  However, prudent investors should note that the risks are not balanced anymore and the dot plot is mildly more hawkish.  Right now, the momo crowd is buying stocks as Powell provides comfort.  Smart money is not likely to find the same comfort that the momo crowd is finding.

• The call from the Afternoon Capsule has proven spot on.  This morning, smart money is selling stocks due to the Fed's announcement.  This morning on Wall Street, there is a rethink of what the Fed said.  The rethink is inline with our analysis in yesterday's Afternoon Capsule.
• Nvidia is hosting its first quantum computing day today.  Quantum computing stocks have been running up in anticipation of bullish news coming out of the event.
• Companies participating in Nvidia's quantum computing day include IONQ Inc (IONQ), D-Wave Quantum Inc (QBTS), and Rigetti Computing Inc (RGTI).
• Investors need to be very careful with quantum computing stocks at this time as they have become the mecca of pump and dump schemes and short squeezes.
• In The Arora Report analysis, there is a high probability of a sell-the-news reaction in quantum stocks.  Quantum computing has the potential to be bigger than the internet. 
• Initial jobless claims came at 223K vs. 220K consensus. Jobless claims continue to behave well.  Initial jobless claims is a leading indicator and carries heavy weight in The Arora Report's adaptive ZYX Asset Allocation Model with inputs in ten categories.
• Quadruple witching is tomorrow.  $4.5T notional value of derivatives will expire.  Quad witching appears to be deterring the stock market from falling and may even cause an upspike.

U.K.

The Bank of England (BOE) has announced its rate decision.  BOE is maintaining rates at 4.5%.

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 Nasdaq 100 ETF (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 ran up with stocks yesterday on the Fed's announcement.

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 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.