Global Bull Market Holds Strong Despite Tariff Moves On Korea And Japan; Treasury Auction Results May Steer Market Direction

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

Strong Global Bull

Please click here for an enlarged chart of Ishares Msci South Korea ETF EWY.

Note the following:

• This article is about the big picture, not an individual ETF.  The chart of EWY ETF is being used to illustrate the point.
• The chart shows how strong the global bull is in stock markets across the world.

• The chart shows that stocks in South Korea rallied after Trump imposed huge tariffs on South Korea.  Stocks in Japan also rallied after Trump imposed huge tariffs on Japan.
• The chart shows our buy signal near the April lows on Korea ETF EWY and huge gains since then that are beating the S&P 500 (SPX).
• By now, you may be asking why did the stocks rally in Korea and Japan after Trump imposed huge tariffs.  There are three reasons:
  • Global bull is very strong.  In a strong bull market, markets focus on hope and ignore potential negatives.
  • Trump extended the deadline from July 9th to August 1st.
  • Trump is showing flexibility to extend the deadline beyond August 1st.
• The chart shows our signals to take profits in EWY prior to the big drop.  These and similar signals helped protect investors from the big drop in April.
• In the early trade, there is buying in the U.S. stock market on optimism about Trump's flexibility.  For the time being, the market is ignoring the negatives of tariffs.
• Prudent investors should pay attention to interest rates that are inching up again ahead of Treasury auctions.  Treasury will conduct three-year auction today, ten-year auction tomorrow, and thirty-year auction on Thursday.  If auction results are good, expect the stock market to rally.  On the other hand, if an auction fails, there is significant downside risk.
• The Fed minutes for the June meeting will be released at 2 pm tomorrow, and it may be market moving.

Magnificent Seven Money Flows

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

Bitcoin is seeing buying.

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.