Stock Market Game Plan For Investors After Biden Withdraws

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

Game Plan

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

Note the following:

• In the wake of Biden withdrawing and Harris becoming the presumptive nominee, investors need a game plan.
• The chart shows that Nasdaq 100 has broken a trendline that has been in place since the April pullback.
• The chart shows that the stock market is moving higher in the early trade on the belief that Harris will be friendlier to big tech compared to Biden.
• RSI on the chart shows the stock market is oversold.  This makes it easy for Harris supporters to run up the market.
• It is worth a reminder that The Arora Report is politically agnostic.  Our sole job is to help our members extract the maximum amount of money out of the markets with the least possible risk.
• Opinions are a dime a dozen.  Here are the key points based on the rigorous analysis built on hard data:
  • The probability of Trump becoming the next president is 60%.  This is 5% lower than it was before Biden withdrew.  Assuming Harris is the eventual Democratic nominee, the probability of Harris becoming the next president is 40%.
  • The probability of a red sweep has fallen from 65% to 55%.
  • There is excitement about Harris, and the news cycle has shifted from Trump to Harris. Expect this excitement to be temporary unless someone else jumps into the race on the Democratic side.
• Bonds are being bought on the falling probability of a Trump election. The market believes that Trump’s policies will be more inflationary than Harris’s.  Investors need to remember that not much is known about Harris’s policies.  The presumption is that she will continue with Biden’s policies with the following exceptions:
  • She will be friendlier to big tech.
  • She will be more anti-oil and anti-gas.
  • She will try to borrow and spend more than Biden.
  • She will be bitcoin friendly.
• The dollar is slightly weaker on expectations that Harris will borrow more than Biden.
• Gold is seeing some selling on expectations that a Harris administration will be more predictable than Trump.
• Bitcoin ran up Friday on expectations that Trump will be bitcoin friendly. Bitcoin is holding its gains on the expectation that, unlike Biden, Harris will be bitcoin friendly.
• In the early trade in the stock market, the Trump trade is on pause, and the Harris trade is seeing buying.
• In The Arora Report analysis, investors should consider the Trump trade as the main trend and the Harris trade as a temporary counter trend. This means buying the Trump trade on dips and selling or taking profits on rallies due to the Harris trade.  

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 BTC/USD continues to levitate as both Trump and Harris are seen as bitcoin friendly.

Protection Band And What To Do Now

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

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.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.