SHIFT FROM NVIDIA TO THIS STOCK AS THE FAVORITE, TRADERS MOVING FROM TRUMP TRADE TO BESSENT TRADE

By?Nigam Arora?& Dr. Natasha Arora

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

Bessent Trade

Please click here for a chart comparing Nvidia (NDVA) and Microstrategy (MSTR).?

Note the following:

• The chart shows Microstrategy (MSTR) is up over 70% since Trump’s re-election.
• The chart shows Nvidia (NVDA) on the other hand is down about 2.5% since Trump’s re-election.??
• There is a sharp difference between Nvidia and Microstrategy.
• -- Nvidia has developed world changing chips for artificial intelligence.
• -- Microstrategy buys bitcoin and is a leveraged way to play bitcoin. At one time, MSTR market cap rose to over 300% of the value of the bitcoin it owned.??
• Traders have shifted from NVDA being their favorite stock to MSTR being their favorite stock. ?
• Here is how Microstrategy’s business model works:
• -- Microstrategy raises money by selling stocks and bonds.
• -- Microstrategy uses the proceeds to buy bitcoin.
• --?Microstrategy highly publicizes its plans to buy bitcoin.
• -- ?Microstrategy buying runs up bitcoin.?The run up in bitcoin prompts traders to super aggressively buy more MSTR stock.
• -- The super aggressive buying runs up MSTR stock.
• -- Microstrategy takes advantage of the run up in its stock to buy more bitcoin.
• --?Microstrategy continues to repeat the process, and traders continue to buy more MSTR stock, running it up higher.
• Nvidia’s business model is to continuously innovate and progressively produce more powerful chips and software to advance AI.??
• 72.5% outperformance shown on the chart of MSTR over NVDA is a great indicator for prudent investors of the sentiment in this market.??
• Investors are buying stocks and cryptos with total abandon.? If it was not for the positive seasonality and year end chase, this kind of reckless buying would have resulted in increasing the protection band because extreme positive sentiment is historically a sell signal. ?However, The Arora Report call remains to buy the dips because the year end chase is likely to trump all other factors.? In year end chase, even bearish money managers aggressively buy stocks to keep up with their benchmarks.
• Trump has picked Scott Bessent as the next Treasury Secretary.? Bessent is a Wall Street insider.? Elon Musk had previously tweeted that the selection of Bessent would mean business as usual.? Wall Street is celebrating Bessent’s selection by starting to shift from the Trump trade to the Bessent trade. ?In The Arora Report analysis, the Bessent trade and the Trump trade have some common elements, but they also have some opposing elements. ?Here is a summary of the Bessent trade:
• -- Buy stocks, especially financial stocks and highly speculative stocks.
• -- Buy bonds.? Yields are falling across the board.
• --?Sell the dollar.??Sell gold and silver.
• -- Sell oil.
• -- Moderating manic buying in cryptos, including bitcoin.? There are always crosscurrents.? Michael Saylor, CEO of Microstrategy, is indicating that Microstrategy will be buying bitcoin today from the $3B raised from a bond sale. For next level information on bitcoin, listen to the podcast titled “Out Of This World Bitcoin Plan Emerges,” which will be published shortly.??
• Consumer confidence data will be released at 10am ET.? In The Arora Report analysis, consumer confidence has risen after Trump’s re-election.? The consensus is 113.? Expect the stock market to react positively to the number irrespective of what it comes at because of the extreme positive sentiment.? When market sentiment is at an extreme positive, the stock market goes up even on bad news. ?
• FOMC minutes will be released at 2pm ET.? In The Arora Report analysis, the minutes are not likely to show any surprise, and as such, the market reaction may be muted.???
• As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. ? Please scroll down to see the protection band. The protection band is one of the large number of unique edges that are available to members of The Arora Report.

See also? WEEKLY STOCK MARKET DIGEST: WHAT PRUDENT INVESTORS NEED TO KNOW NOW

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).

In the early trade, money flows are neutral in NVDA.

In the early trade, money flows are positive in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

The momo crowd is *** (To see the locked content, please take a 30 day free trial) stocks in the early trade.? Smart money is *** in the early trade.

Note for new members: Smart money often sells into the strength generated by momo crowd buying and buys into the weakness generated by momo crowd selling.? Over a long period of time, investors come out ahead by adopting smart money’s ways.? The exception is in a raging bull market – for very short term trades, consider following the momo crowd and not smart money.

Very Very Short-Term Indicator

Our very, very short-term early stock market indicator is ***.? This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.

Gold

The momo crowd is *** gold in the early trade.? Smart money is *** in the early trade.

For longer-term, please see gold and silver ratings.

Oil

The momo crowd is *** oil in the early trade.? Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) is range bound.?

See also? AMD EARNINGS SHOW POWER OF NVIDIA SOFTWARE, ADP DATA DEFIES EXPECTATIONS

Markets

Interest rates are ticking down, and bonds are ticking up.

The dollar is weaker.

Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.

S&P 500 futures are trading at 6029 as of this writing.? S&P 500 futures resistance levels are 6131 and 6256: support levels are 5926, 5748, and 5622.

DJIA futures are up 401 points.

Gold futures are at $2679, silver futures are at $30.78 and oil futures are at $70.78.

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 is very popular.? The 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 holding *** in cash, Treasury bills, short term fixed income, or allocated to short-term tactical trades; and short to medium-term hedges of ***, and short term hedges of ***. 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.

See also? MONEY FLOWS OUT OF GOLD INTO BITCOIN, NEXT BITCOIN STOP $100,000, AGGRESSIVE BUYING IN TESLA

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.

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