The Opposite Of What Wall Street Told You About Stocks Has Happened, Key Nvidia Event Ahead

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

Outperforming Markets

Please click here for an enlarged chart comparing SPDR S&P 500 ETF Trust (SPY) which represents the benchmark stock market index S&P 500 (SPX), Invesco QQQ Trust Series 1 (QQQ), Euro Stoxx 50 ETF, Mexico ETF iShares MSCI Mexico ETF (EWW), and emerging markets ETF iShares MSCI Emerging Markets ETF (EEM).

Note the following:

• The Arora Report's call was to buy tactical positions on President Trump's re-election and sell on the inauguration.  That call has now proven spot on.
• The chart shows that since Trump's inauguration, SPY is down 6.2% and QQQ is down 8.01%.
• Wall Street's consensus call was that the U.S. stock market would go higher after Trump's inauguration.  The chart shows that so far Wall Street's call has been wrong.
• Another consensus call from Wall Street has also been proven wrong.  Wall Street's call was that Nasdaq 100, which is mostly tech stocks, would outperform S&P 500.  The chart shows tech stocks have under performed S&P 500 by 1.9%.
• More striking is that, as shown on the chart,  emerging market stocks have outperformed the U.S. stock market by 12.78%.
• Even more remarkable, as is shown on the chart, is that large European stocks have outperformed the U.S. stock market by 17%.
• Most remarkable is that the Mexican stock market has outperformed the U.S. stock market by 16.35%.
• After analyzing the new administration's policies, Wall Street's consensus call was to sell emerging market stocks, including Mexican stocks, and European stocks.   Further, Wall Street's consensus was to put the money from selling international stocks into U.S. tech stocks.  Wall Street made two supportive arguments:
  • After Trump's inauguration, U.S. exceptionalism would take center stage.
  • Tariffs would hurt emerging markets, including Mexico, and Europe.
• Here are the three lessons from the foregoing:
  • A well diversified portfolio is a component of maximizing the wealth investors extract from the markets.  Diversification should include international markets.
  • Follow Arora's Second Law of Investing and Trading that states "Nobody knows with certainty, what is going to happen next in the markets."  Make decisions based on Arora's Third Law that states, "Making investing and trading decisions based on probabilities is the only realistic and profitable approach." 
  • Prudent investors cannot rely solely on Wall Street consensus and media, as they are often wrong.
• In our analysis, Wall Street's call was wrong because Wall Street did not do a 360 degree analysis.  Wall Street was focused on only one viewpoint as it suffered from recency bias.  The recency bias was that Trump's second term would be the same as Trump's first term.  Of course, as a member of The Arora Report, you knew in advance that Trump's second term was going to be different from Trump's first term. 
• At NVIDIA Corp (NVDA) GPU Technology Conference 2025 (Nvidia GTC), the key event today is Nvidia CEO Jensen Huang's keynote speech at 1pm ET.  Huang's speech is extremely important as it will determine the direction of artificial intelligence stocks and, in turn, the entire stock market.
• The FOMC meeting starts today.  The rate decision will be announced tomorrow at 2pm ET followed by Chair Powell's press conference at 2:30pm ET.
• In our analysis, the move up in the stock market over the last two days has been a result of the following:
  • A viscous short squeeze
  • Dip buying mentality
• In our analysis, this morning the first leg of the short squeeze appears to be over.  This is removing buying pressure resulting in stocks drifting lower in the early trade.

Housing

After a sustained period of weakness, the new data shows housing is picking up.  Here are the details of the just released data.

• Housing starts came at 1.5M vs. 1.385M consensus.
• Building permits came at 1.456M vs. 1.450M consensus.

Magnificent Seven Money Flows

In the early trade, money flows are negative in NVDA, Apple Inc (AAPL), Amazon.com, Inc. (AMZN), Alphabet Inc Class C (GOOG), Meta Platforms Inc (META), Microsoft Corp (MSFT), and Tesla Inc (TSLA)

In the early trade, money flows are negative in S&P 500 ETF (SPY) and Nasdaq 100 ETF (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 is range bound.

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 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.