Opportunity In Missile Defense Stocks, Once In A Century Buying Stampede In Hong Kong

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

The Power Of Missile Defense

Please click here for an enlarged chart of Rtx Corp RTX.

Note the following:

• This article is about the big picture, not an individual stock. The chart of RTX stock is being used to illustrate the point.
• Yesterday, Iran fired about 180 ballistic missiles on Israel.  Israel and the U.S. were able to intercept most of these missiles with missile defense systems. These missiles reached Israel in 12 minutes. The defense was impressive considering there were no fatalities.
• What happened in Israel yesterday shows the power of missile defense systems and illustrates the opportunity for investors in missile defense stocks.
• As full disclosure, RTX is in The Arora Report’s ZYX Buy Core Model Portfolio. RTX is The Arora Report's favorite missile defense stock. 
• The chart shows that RTX has broken out on the success of missile defense in Israel.
• RTX is a joint developer of the Iron Dome used in Israel. RTX is best known for its Patriot Air And Missile Defense System.  RTX also produces several other missile defense systems and aircraft engines.
• RTX entered The Arora Report portfolio when the stock experienced a massive drop on the news of cracks in Pratt & Whitney engines. The Arora Report uses over 50 different strategies. RTX belongs to the strategy of buying a good company where the stock is down due to a fixable technical problem.
• The chart shows the power of buy zones.  Buy zones allow investors to buy stocks and ETFs when the probability adjusted risk reward is more favorable.  Risk and reward are two sides of the same coin in investing. Smart money focuses on risk adjusted returns. In contrast, the momo crowd focuses only on rewards – the result is that the momo crowd goes through volatile cycles of making money and losing money, and in the end, accumulating far less than smart money.
• The chart illustrates the power of a billionaire and hedge fund technique known as a trade around position.  A trade around position can dramatically increase profits and reduce risks.
• The chart shows that the RTX trade around position was started at an average of $80.70. The position has over 50% gain as of this writing.  The trade around position is separate and distinct from the core position.
• Peace is not about to break out in the world.  As such, all investors should consider a defense stock or ETF in their portfolio.
• For those interested in ETFs, The Arora Report’s ETF of choice is iShares US Aerospace & Defense ETF ITA.  As full disclosure, ITA is in The Arora Report’s ZYX Allocation Model Portfolio. 
• Automatic Data Processing Inc ADP is the largest private payroll processor in the country.  ADP uses its data to provide a glimpse of the employment picture ahead of the official jobs report that will be released on Friday.  ADP employment change came at 143K vs. 120K consensus.  This indicates that the jobs picture is staying strong.
• Previously, JOLTS job openings came at 8.04M, higher than expectations.
•  ISM Manufacturing Index came at 47.2 vs. 47.4 consensus.

Buying Stampede

Stocks are experiencing a once in a century buying stampede in Hong Kong.  Stocks in Hong Kong rose 7%. Property developers rose 47%, and broker stocks rose 35%.  As full disclosure, Hong Kong ETF iShares China Large-Cap ETF FXI is in The Arora Report’s ZYX Emerging.

Magnificent Seven Money Flows

In the early trade, money flows are neutral in Microsoft Corp MSFT and Meta Platforms Inc META.

In the early trade, money flows are negative in  Apple Inc AAPL, Amazon.com, Inc. AMZN, Alphabet Inc Class C GOOG, NVIDIA Corp NVDA, and Tesla Inc TSLA.

In the early trade, money flows are negative 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 selling along with junk stocks.

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.