To gain an edge, this is what you need to know today.
Gold Soars
Please click here for an enlarged chart of SPDR Gold Trust (NYSE: GLD).
Note the following:
- The chart shows gold is soaring to a new high.
- The chart shows zone 1 (resistance) is the magnet.
- The chart shows zone 2 (support) is not far below.
- RSI on the chart shows gold is overbought and vulnerable to a pullback. More importantly, RSI is showing a divergence. A divergence often foretells a pullback unless there is macro news.
- Prudent investors should note the following:
- This leg up in gold is being primarily driven by investors new to gold. Most of these new investors have never owned gold before and have traditionally been crypto buyers and part of the stock market momo crowd.
- Investors new to gold are blindly buying, attracted by the magnet shown as zone 1 on the chart.
- Gold ETF (GLD), iShares Silver Trust (NYSE: SLV) and gold miner Newmont Corporation (NYSE: NEM) are in our portfolio. All three positions have large gains.
- It appears that investors who have been buying gold all along are no longer buying gold. This pattern is similar to the pattern seen in 2011. After giving repeated signals to back up the truck and buy gold when gold was in the $600 range, in 2011 when gold reached $1904, we gave a signal to sell 50% of the gold position and put a stop on the remaining 50% at $1857. Gold topped the same day and subsequently fell close to $1000.
- As investors new to gold rush to buy gold, gold ETFs, and gold futures, they are oblivious that the demand for physical gold is weakening, especially in India and China. India and China are the biggest consumers of physical gold. From our sources, physical gold is being sold at as much as a $40 discount due to weak demand.
- The rise in gold this morning is being triggered by fears that the U.S. government will shut down. In contrast to gold, stock market investors are not concerned about the possible government shutdown.
- Here is what prudent investors need to know about the possible government shutdown:
- Historically, Democrats and Republicans reach a deal at the last minute.
- In our analysis, if the stock market drops on a government shutdown, it will be a buying opportunity.
- This is the end of the quarter. This morning, window dressing related buying in the stock market is very aggressive. In window dressing, some money managers buy the best performing stocks of the quarter and sell the weakest stocks of the quarter. The purpose is to show their clients in the quarter end reports that they were holding the best performing stocks.
- In our analysis, prudent investors should not get carried away with window dressing buying because quarter end rebalancing is ahead. Further, quarter end rebalancing will result in selling stocks by those who are rebalancing.
- In a sign of the times, the largest buyout by private equity ever has just taken place.
- The buyout is of video game maker Electronic Arts Inc (NASDAQ: EA) for $55B. We had identified EA as a buyout target a long time ago. EA is in our portfolio, long from $20.74. EA is our 212th portfolio company to be bought out.
- The prior largest buyout was for $45B for Texas power company (TXU) in 2007. The stock market crashed in 2008.
- In 2007, sentiment was extremely positive and liquidity was very high, just as it is now in 2025.
Magnificent Seven Money Flows
Most portfolios are now heavily concentrated in the Mag 7 stocks. For this reason, to get ahead and get an edge, investors need to dig below the surface of the Mag 7 stocks. It is equally important to rise above the noise of daily news on the Mag 7 stocks. The best way to get an edge, dig below the surface, and rise above the noise of the daily news is to pay attention to early money flows in the Mag 7 stocks on a daily basis. When there is significant news in the Mag 7 stocks that rises above the threshold of noise and impacts your entire portfolio, it is covered in the main section above.
In the early trade, money flows are positive in Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc Class C (NASDAQ: GOOG), Meta Platforms Inc (NASDAQ: META), Microsoft Corp (NASDAQ: MSFT), NVIDIA Corp (NASDAQ: NVDA), and Tesla Inc (NASDAQ: TSLA).
In the early trade, money flows are neutral in Apple Inc (NASDAQ: AAPL).
In the early trade, money flows are positive in SPDR S&P 500 ETF Trust (NYSE: SPY) and Invesco QQQ Trust Series 1 (NASDAQ: 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).
Oil
There are rumors that OPEC+ will increase production by 137K barrels. This is bearish for oil.
Bitcoin
Bitcoin (CRYPTO: BTC) is range bound.
What To Do Now
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.
Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.
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