The Real Reason Trump Walked Back From The Brink, Tesla Bulls Energized, Intel Cuts

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

Walk Back From The Brink

Please click here for an enlarged chart of iShares 20+ Year Treasury Bond ETF TLT.

Note the following:

•  The chart shows that TLT was staying below zone 3.
• The chart shows the recent rally in bonds after President Trump paused reciprocal tariffs failed.
• The chart shows that the rally did not even reach the top band of zone 3 before failing.  This indicated high stress in the bond market.
• The chart shows that bonds were back in the danger zone ahead of the all important $70B 5 year Treasury auction today.
• In our analysis, without President Trump walking back from the brink, there was real danger for the auction today to go poorly and push bonds into zone 4 shown on the chart.
• As a member of The Arora Report, you have been ahead of the curve as you knew that the bond market was President Trump's pain point.
• President Trump walked back from the brink:
  • President Trump said he did not intend to fire Fed Chair Powell.
  • President Trump said soothing things about China.
  • Earlier in the day yesterday, Bessent had laid the groundwork, indicating that the situation with China should de-escalate over time.
• Immediately after President Trump's comment about not firing Powell, extremely aggressive buying came in the markets.
  • Stocks sharply rose in the after hours.
  • Bonds rose.
  • Oil rose.
  • Dollar rose.
  • Yen fell.
  • Gold fell.
• The reason the yen and gold fell was because after President Trump's walk back, there is less need for safe havens.
• Earlier in the afternoon, prior to President Trump's walk back, as full disclosure, We had given signals to take partial profits on gold ETF SPDR Gold Trust (GLD), iShares Silver Trust (SLV), Newmont Corporation (NEM).  With the benefit of hindsight, these calls now seem prescient, but only time will tell how good these calls were.
• Tesla Inc (TSLA) stock is very popular among retail investors.  Moves in TSLA stock impact sentiment.  After hours, Tesla reported dismal earnings – the worst in a long time.  Aggressive buying came into TSLA stock when CEO Elon Musk said he would be spending less time on DOGE and more time on his businesses.  This comment from Musk energized Tesla bulls and added to the positive sentiment in the stock market that had started minutes earlier from President Trump's statement.
• Adding to the positive sentiment is that India may consider zero tariffs on Harley-Davidson Inc (HOG) bikes.  Musk is also thinking of expanding into India.
• There was considerable Fed speak yesterday.  Normally, we would have shared with you the important points from the Fed speak in this morning's Capsule.  However, President Trump's comments have rendered the Fed speak meaningless.
• Investors should pay careful attention to the results of the Treasury auction today.
• The Fed's Beige Book will be released today at 2pm ET.
• A 20% staff cut at a big company is draconian.  Yet, this is exactly what the new CEO at Intel Corp (INTC) is doing.  Investors love layoffs.  Unfazed by the misery of those who are laid off, investors are cold hearted.  Investors believe the bigger the layoff the better.   Money is flowing into INTC stock on the news.
• Adding to the positive sentiment are good earnings from Boeing Co (BA), AT&T Inc (T), GE Vernova Inc (GEV), Boston Scientific Corp (BSX), and SAP SE (SAP).

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 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.

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Bitcoin

Bitcoin BTC/USD is seeing aggressive buying.

Arora 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.