Aggressive Buying In Silver As Fed Chair Jerome Powell Itching To Cut Rates

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

Fueling Positive Sentiment

Please click here for an enlarged version of the chart of iShares Silver Trust SLV.

Note the following:

• The chart shows aggressive buying in silver.
• As full disclosure, silver ETF SLV is in The Arora Report ZYX Buy Model Portfolio.  
• The chart shows silver is breaking out of short term resistance.
• Significant overhead resistance is ahead that was created when the meme crowd went crazy in 2020 and 2021 and bought all the physical silver they could.
• In part, what happens to silver will depend on if the meme crowd goes crazy again.
• For the last few years, the traditional relationship between how silver moves relative to gold has been broken.
• The move on the chart shows that the traditional relationship between silver and gold moves is returning.
• The big move in silver is being triggered by Powell itching to cut rates.
• Powell has become ultra dovish.  Fed Chair Powell is itching to cut interest rates.  Powell said that the recent hotter inflation data does not “materially change” the outlook and he anticipates cutting interest rates later in the year.
• ISM Non-Manufacturing PMI came at 51.4% vs. 52.6% consensus.  The weaker than expected services data caused the stock market to go up on its release.
• Sentiment was already extremely positive.  Powell itching to cut rates and weaker ISM Services data is adding to the extremely positive sentiment.
• Also adding to the extremely  positive sentiment are two pieces of news:
  • Apple Inc AAPL is working on a home robot as the next big thing.
  • Alphabet Inc Class C GOOG may charge for search based on AI.
• Jobless claims came at 221K vs. 214K consensus.  This indicates that the jobs picture is still very strong, but not as strong as seen over the prior few weeks.
• The jobs report, the mother of all numbers, will be released tomorrow at 8:30am ET.  The jobs report will likely be market moving.
• As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.

Magnificent Seven Money Flows

In the early trade, money flows are positive in AAPL, Amazon.com, Inc. AMZN, Meta Platforms Inc META, Microsoft Corp MSFT, NVIDIA Corp NVDA, and Tesla Inc TSLA.

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

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

The momo crowd is buying stocks in the early trade.  Smart money is inactive in the early trade.

Gold

The momo crowd is selling gold in the early trade.  Smart money is inactive in the early trade.

For longer-term, please see gold and silver ratings.

The most popular ETF for gold is SPDR Gold Trust GLD.  The most popular ETF for silver is SLV.

Oil

The momo crowd is selling oil in the early trade.  Smart money is inactive in the early trade.

For longer-term, please see oil ratings.

The most popular ETF for oil is United States Oil ETF USO.

Bitcoin

Bitcoin BTC/USD is range bound.

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.

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 seven 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.