Aggressive Stock Buying On Oil Drop And Israel Gaining Control Of Tehran Skies

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

Aggressive Stock Buying

Please click here for an enlarged chart of oil futures (CL_F).

Note the following:

• The chart shows this morning oil has been progressively dropping.
• The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.  The chart shows the VUD indicator is mostly orange, indicating net supply of oil.
• Going into the weekend, the positioning was one sided in favor of oil going up.  To understand one sided positioning, think of a boat where everyone is on one side.  As long as the waters are calm, the boat continues to float, but when a storm hits, the boat can capsize.  Positioning is an important Wall Street mechanic.  Understanding positioning can give you an edge.
• This morning, several factors are working against the price of oil.
  • Positioning was one sided coming into this morning.
  • Israel has not attacked Iran's oil export facilities.  Israel is attacking oil facilities that cater to Iran's domestic consumption.
  • Iran has indicated that it does not want to block the Strait of Hormuz.  The Strait of Hormuz is a narrow passageway through which about 25% of the world's oil is transported.
  • The U.S. has built up a massive naval presence in the area.
  • President Trump has indicated that the U.S. may intervene.
• There is aggressive buying in stocks for the following reasons:
  • Oil is dropping.
  • A statement from President Trump that he is open to intervention.
  • Israel has gained total control of the skies over Iran's capital Tehran.
  • Israel's prime minister Netanyahu is saying "we are on a path to victory."

Magnificent Seven Money Flows

In the early trade, money flows are positive in 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).

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).

Today's Best Finance Deals

Bitcoin

Bitcoin is range bound.

Arora Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.  Our proprietary 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.