Small Caps Beat Nvidia, Amazon, And Tesla; Profiting From Trump's Plan To Drive Bitcoin To The Moon

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

Bitcoin To The Moon

Please click here for an enlarged chart comparing iShares Russell 2000 ETF IWM to the Magnificent Seven stocks 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.

Note the following:

• The chart shows that small cap ETF (IWM) has beaten all seven of the Magnificent Seven stocks by a large margin.
  • IWM has beaten AI king NVDA by 19.51%.
  • IWM has beaten AMZN by 20.43%.
  • IWM has beaten TSLA by 16.64%.
• As full disclosure, IWM is The Arora Report’s ZYX Allocation Model Portfolio.
• Here are the reasons small caps have beaten the Magnificent Seven.
  • Many hedge funds have been short IWM. A short squeeze has exaggerated the move.
  • Trump’s policies will be good for small caps. Small caps have been boosted by Trump becoming the front runner.
  • Small caps borrow heavily. A rate cut will benefit small caps.
  • There is a rotation going on in which money is flowing out of the Magnificent Seven stocks and into small caps.
• The Arora Report has been bullish on small caps. However, after this large move, it is time for caution. The reason is that so far small cap earnings have not kept up with earnings from the Magnificent Seven. Many earnings are still ahead in this earnings season.  These earnings will provide a clearer picture. 
• Among the Magnificent Seven stock, TSLA and GOOG have already reported worse than expected earnings. Earnings are ahead this week from Microsoft (MSFT), Amazon (AMZN), Apple (AAPL), and Meta (META).
• We have been sharing with you that Trump could propose setting up a national strategic bitcoin reserve. This is exactly what Trump did in his speech in Nashville on Saturday. Trump’s conversion from calling bitcoin a scam to a plan to drive bitcoin to the moon is complete.
• There is significant enthusiasm among bitcoin bulls as setting up a U.S. national strategic reserve for bitcoin will legitimize bitcoin.  Bitcoin is seeing very positive money flows.
• Bitcoin is approaching a resistance zone. The resistance zone is $71,000 - $74,000.
• Investors should also be prepared for a potential ‘sell the news’ reaction as bitcoin approaches the resistance zone.
• Opinions on bitcoin dramatically vary. A large number of investors believe bitcoin is a scam, while others are all in on bitcoin going to the moon.  Irrespective of your opinion of bitcoin, money is to be made in bitcoin on both the long and short sides. 
• Investors should watch for an expansion of war in Northern Israel and Lebanon.

Magnificent Seven Money Flows

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

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

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  is seeing aggressive buying.

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.