Pay Attention To Trump-Musk Feud, Worst Start To Dollar Since 1973 - Stock Market Bulls Celebrate

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

Bulls Celebrating

Please click here for an enlarged chart of U.S. dollar index (USDX, DX, DXY).

Note the following:

• The chart shows the fall in the dollar since the beginning of 2025.  The dollar is off to its worst start for the year since 1973.
• RSI on the chart shows the dollar is extremely oversold, indicating a possibility of a bounce.
• About half of earnings from S&P 500 companies come from overseas.  A weaker dollar means a boost to earnings.  This has stock market bulls excited.
• President Trump's "One Big Beautiful Bill" is progressing through the Senate.  Stock market bulls are excited for the high deficit amount because some of the money will pour into the stock market, pushing it higher.
• The feud between President Trump and Tesla CEO Elon Musk is escalating.
  • Elon Musk conducted a poll on social platform X asking if it is time to create a new political party in the U.S. actually represents that 80% of Americans in the middle.  Out of 5,630,775 votes, 80.4% said yes.  In our analysis, the poll is not scientific and is highly biased because Musk's followers are the ones voting.
  • At this time in U.S. history when both Republicans and Democrats recklessly borrow and spend for near term political advantage, endangering the future of the country, it is encouraging for the long term investor that someone of the stature of Elon Musk (albeit for his own business reasons) is willing to stand up and try to do something.
  • Prudent investors should get ahead of the curve – a new political party backed by Musk would increase political uncertainty.  Markets respond to uncertainty with volatility and rotation into safe havens like gold.  In our analysis:
    • Market expectations around growth stimulating policies would lower.
    • Market expectations of policy would be disrupted.  This includes tax policy, trade policy, and regulation, particularly around energy and tech.    
    • Populist policies may gain momentum, which would impact central bank independence and could introduce economic platforms the markets have not factored in.  
    • The likelihood of political gridlock increases. 
  • President Trump suggested that DOGE look at the subsidies Musk's companies have received.
  • When asked about the possibility of deporting South-African born Musk, President Trump said "we'll have to take a look."
• Trade talks are continuing ahead of the deadline set by President Trump.  However, it is not all smooth sailing.
  • The E.U. is willing to accept a 10% universal tariff on many of its exports if there is a lower tariff on chips and drugs.
  • President Trump threatened to increase tariffs on Japan if Japan would not accept US rice exports.
• We shared with you yesterday that window dressing was underway.  In window dressing, some money managers buy the best performing stocks of the quarter and sell the weakest stocks of the quarter.  Window dressing put upward pressure on the stock market yesterday afternoon.  With that upward pressure removed, stocks are pulling back in the early trade.
• This afternoon blind money will start replacing window-dressing to exert upward pressure on the stock market.  Expect blind money to flow into the stock market today and tomorrow.  Blind money is the money that flows into the stock market on the first two days of the month without any analysis irrespective of market conditions.
• ISM Manufacturing Index was released at 10am ET. 
• JOLTS job openings was released at 10am ET.

Magnificent Seven Money Flow

In the early trade, money flows are positive in Apple Inc (AAPL).

In the early trade, money flows are neutral in Microsoft Corp (MSFT).

In the early trade, money flows are negative in Amazon.com, Inc. (AMZN), Alphabet Inc Class C (GOOG), Meta Platforms Inc (META), 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 is seeing selling along with speculative stocks this morning.

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.