Heavy Money Flows In Quantum Computing Stocks, Blind Money Saves The Market, Bitcoin Outflows

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

Money Flows

An enlarged chart of SPDR S&P 500 ETF Trust which represents the benchmark stock market index S&P 500 (SPX).

Note the following:

• The chart shows that in the early morning yesterday the momo crowd was extremely aggressively buying.
• The chart shows selling came in the stock market after the regular session started yesterday.
• In the late afternoon yesterday, the chart shows heavy blind money buying, as is their pattern.  Blind money is the money that flows into the stock market on the first two days of the month without any analysis or regard for market conditions.
• More blind money will flow in the stock market this afternoon.
• In the early trade today, the chart shows the momo crowd is buying more.
• The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.  The chart shows the VUD indicator is mixed.
• Not helping the stock market yesterday was difficult news about three of the seven Magnificent Seven stocks:
  • We shared with readers in yesterday's Morning Capsule,
    • “As of this writing, some of the extreme optimism from early this morning is dissipating on the data that Tesla Inc TSLA deliveries came at 495K vs. 504K consensus.   TSLA stock has been a major gainer after Trump’s re-election.”
  • Apple Inc iPhones are on the decline in China.  Non-Chinese phone sales in China fell by 47.4% in November, making it the fourth month in a row of year-over-year decline.  Apple is attempting to compete with Chinese phones like Huawei and reverse the declining trend with discounts up to $68.50 on the iPhone in China.
  • An excellent Alphabet Inc Class A analyst had the guts to say that the punishment for Google in the antitrust case would be severe.  A judge previously declared that Google is a monopolist.

• Collectively the Magnificent Seven are down 4% this week.  The Magnificent Seven carry such a heavy weight in indexes that for indexes to move higher, AAPL, TSLA, GOOG, Amazon.com, Inc. , Meta Platforms Inc, Microsoft Corp , and NVIDIA Corp have to move higher.
• There are very heavy money inflows in quantum computing stocks, such as IBM Common Stock IBM, Alphabet Inc Class C, Honeywell International Inc HON, Defiance Quantum ETF QTUM, IONQ Inc IONQ, Rigetti Computing Inc RGTI, Quantum Computing Inc QUBT, D-Wave Quantum Inc QBTS, Wisekey International Holding AG – ADR WKEY, Arqit Quantum Inc ARQQ, and Sealsq Corp LAES.  Those who called AI a scam and missed the entire up move in stocks like NVDA and the rest of the Magnificent Seven are now extremely aggressively buying quantum computing stocks – they do not want to miss out on the next big thing like they missed out on AI.  Paradoxically, in The Arora Report analysis, most of these investors are likely to become big bag holders.

China

The Chinese yuan broke the key level of 7.3 yuan per dollar.  In The Arora Report analysis, the People's Bank of China is attempting to combat China's slow economy and the interest rate difference between China and the U.S.  However, falling bond yields in China and rising bond yields in the U.S. are making it a losing battle.

Magnificent Seven Money Flows

In the early trade, money flows are positive in AMZN, GOOG, META, MSFT, and NVDA.

In the early trade, money flows are neutral in TSLA.

In the early trade, money flows are negative in AAPL.

In the early trade, money flows are positive in S&P 500 ETF (SPY) and Invesco QQQ Trust Series 1.

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.  The most popular ETF for silver is iShares Silver Trust.  The most popular ETF for oil is United States Oil ETF.

Bitcoin

Bitcoin BTC/USD bulls were expecting heavy money inflows into bitcoin ETFs on the first day of the new year.  The contrary happened – yesterday saw record outflows from popular bitcoin ETF iShares Bitcoin Trust ETF IBIT.

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.