Stock Buying On Trump Plan To Make Crypto A National Priority, Option Expiration, New Fed Bets And China GDP

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

Five Factors Leading Stocks Higher

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

Note the following:

• The chart shows that the market is now above the breakout line but below the micro resistance zone.
• The chart shows there is buying in the early trade.
• Bulls are buying aggressively in an attempt to break above the micro resistance zone.
• The buying in the early trade is being driven by the following five factors:
  • Bonds are leading stocks higher.  Bonds are moving higher due to negative positioning.
  • President Trump plans to make cryptos a national priority with an executive order.  As a result, there is aggressive buying in cryptos.  Buying in cryptos almost always leads to buying in speculative and junk stocks, and often tech stocks.  This is exactly what is happening in the early trade today.
  • Monthly options expire today.  Option expiration appears to be to the buy side.
  • Wall Street is making new bets on a Fed rate cut on January 29th.
  • There was concern that China would not meet its GDP target.  There is a relief rally based on China Q4 GDP coming in line with expectations.  Here is the data:
    • Q4 came in at 1.6% vs 1.6% consensus
    • For 2024 GDP came in at 5.0% vs 5.0% consensus
• Not helping the bulls is the market waking up to Apple's China problem.  Yesterday, Apple experienced significant selling as the market woke up to the fact that Apple was losing market share in China.  However, as an Arora Report reader, you knew in advance this was happening from our writings as early as Q3 of 2024.  In the Morning Capsule of January 3, 2025 we wrote:

Apple’s (AAPL) 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.

Housing

Housing starts remain strong as builders subsidize mortgage rates.  Here is the latest data:

• Housing starts came in at 1.499M vs 1.381M consensus
• Building permits came in at 1.483M vs 1.454M consensus

Magnificent Seven Money Flows

In the early trade, money flows are positive in Apple Inc, Amazon.com, Inc., Alphabet Inc Class C, Meta Platforms Inc, Microsoft Corp, NVIDIA Corp, and Tesla Inc.

In the early trade, money flows are positive in S&P 500 ETF (SPY) and in 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 is seeing aggressive buying on President Trump's plan to make crypto a national priority.

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.