Back Up The Truck Buying Opportunities May Be Ahead, Record Bets On Bitcoin Drop

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

Buying Opportunity Ahead

Please click here for an enlarged chart of iShares MSCI Mexico ETF EWW.

Note the following:

• President-elect Trump is threatening to impose steep tariffs on Mexico and Canada using an executive order on his first day in office.  
• Mexico's president is responding by claiming that migrant caravans are no longer arriving at the U.S. border.  She is also offering cooperation to stem the flow of drugs to the U.S. 
• If negotiations with Mexico do not go well, stocks in Mexico will be decimated.  That will likely be an opportunity for long-term investors to back up the truck and buy stocks in Mexico.  The reason is that there are simply not enough people in the U.S. to support economic growth and on-shoring of all of the manufacturing from China.  
• The chart shows Mexico ETF EWW is oversold.  However, EWW can become more oversold. 
• Mexico ETF EWW can easily fall to the top support zone shown on the chart.  
• In The Arora Report analysis, the back up the truck buying opportunity will tentatively occur if Mexico ETF EWW falls to the lower support zone shown on the chart.  However, this is all data dependent.  Investors should carefully follow the data points. 
• Investors need to look ahead and be prepared if the opportunity in Mexico arises.  Mexico has been continuously covered in The Arora Report’s ZYX Emerging for 17 years.  As full disclosure, if there is a back up the truck buying opportunity, a signal will be made in The Arora Report’s Real Time Feed of ZYX Emerging.  In a buy signal, the support zone is only one of many factors.  The algorithms used by The Arora Report are highly complex and combine the best elements of macro analysis, fundamental analysis, technical analysis, and quantitative analysis with an overlay of change.  Identifying change early and being prepared to capture opportunity leads to big gains.  
• Trump is also threatening Canada with steep tariffs.  If Canadian stocks are decimated, there will be an opportunity to buy Canada ETF iShares MSCI Canada ETF EWC.  Again, investors need to be prepared ahead of time to capture the opportunity if it arises.  As full disclosure, a signal to buy Canadian stocks will be in The Arora Report’s ZYX Allocation.  
• Yesterday evening, when the news broke of Trump's tariff plan, stock futures were first quickly sold.  Then, the momo crowd stepped in and has been aggressively buying the dip.  
• There are important developments in bitcoin.  Please scroll down to the bitcoin section below.  

Magnificent Seven Money Flows

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

In the early trade, money flows are neutral in Alphabet Inc Class C GOOG and Microsoft Corp MSFT.

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

At a time when almost everyone is bullish on Bitcoin BTC/USD and cryptos, money flows are at a record to short bitcoin.  As an example, money flows in ProShares UltraShort Bitcoin ETF (ARCA: SBIT) were at a record $18.8M yesterday.  Of course, money flows in short bets on bitcoin pale in comparison to money flows in long bets.  

Bitcoin whales took profits in the zone of $93,000 – $98,000, taking advantage of super excited retail investors.  At a time when retail investors were converting their dollars into bitcoins, bitcoin whales were converting their bitcoins into dollars.

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.