Here Is How The Stock Market Will Move After Trump's Tariff Reveal On Liberation Day

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

Trump Reveal Ahead

Please click here for an enlarged chart of Invesco QQQ Trust Series 1 QQQ.

Note the following:

• The chart of QQQ is important because it mostly represents tech stocks.
• The chart shows that the rally from the March 11 low failed before reaching the top band of the resistance zone.  This is a negative.
• The chart shows that QQQ failed at the 200 day moving average.  To the legions of investors who believe in the power of the 200 day moving average, this is a negative.
• The chart shows yesterday's low decisively undercut the March 11 low.  This is a negative.
• Stops of those who follow traditional technical analysis were taken out at the open yesterday.  Smart money consistently picks the pockets of those following traditional technical analysis. The Arora Report has aligned its systems with smart money.  Consider using stop zones and target zones given in the Real Time Feeds instead of basing stops on traditional technical analysis.
• RSI on the chart is showing a positive divergence.  In plain English, this means that the internal momentum of tech stocks is not as negative now as it was when tech stocks were higher.  This is a positive.  Many momo gurus are citing the positive RSI divergence to persuade their followers to buy stocks.
• The chart shows the dramatic reversal yesterday from the lows.  The dramatic reversal to the upside was due to market mechanics.  The two market mechanics most responsible for the move up from the lows were quarter end rebalancing and short squeeze.
• There is another market mechanic at play today.  Blind money will pour into Wall Street.  Blind money is the money that pours in on the first day of the month without any analysis and irrespective of market conditions.  Blind money flows are especially strong on the first two days of a new quarter.
• Tomorrow is Liberation Day.  President Trump has decided on a plan, but he has not revealed it.  Presumably the plan will be released tomorrow on Liberation Day.  However, prudent investors need to keep in mind that President Trump is unpredictable, and he may release the plan earlier.  Or, there may be leaks and rumors that move the market.
• There are divergent opinions on how the stock market will behave after Trump reveals his tariff plan on Liberation Day.
  • Permabulls are expecting a rip-roaring rally and urging their followers to aggressively buy stocks.
  • Permabears are expecting a big market drop.
• In our analysis, prudent investors should ignore both the permabulls and the permabears.
• In our analysis, how the market behaves after Trump's reveal will come down to the difference between expectations about tariffs that are built into the market and what Trump reveals.
  • If the tariffs Trump reveals are less onerous than market expectations, the stock market will go up.
  • If the tariffs Trump reveals are more onerous than market expectations, the stock market will go down.
• In the early trade, stocks are trading lower as the buying pressure from rebalancing goes away.  Blind money is mostly invested in the afternoon.  There is some buying in the early trade as Wall Street tries to front run and profit from blind money.  Often, Wall Street traders buy in the morning at lower prices and then sell to blind money at higher prices in the afternoon.  However, such buying this morning is somewhat muted due to the risk of tariff rumors and leaks.
• ISM Manufacturing and JOLTS job openings may be market moving.

Magnificent Seven Money Flows

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

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), and Microsoft Corp (MSFT)

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

In MC, replace stocks, gold, and oil sections with….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 seeing buying.

Protection Band And What To Do Now

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