Avoid The Mistake Countless Investors And Advisors Are Making, Oral Weight Loss Drug Is Almost Here

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

Avoid The Common Investment Mistake

Please click here for an enlarged chart of iShares 20+ Year Treasury Bond ETF (TLT).

Note the following:

• Countless investors and investment advisors are losing significant money because they are stuck in the orthodox thinking that long bonds are a safe haven.  
• The chart shows when TLT broke above zone 2 (resistance), there was aggressive buying in bonds, often considered a safe haven.
• The chart shows bonds fell the next day below zone 2.
• The chart shows bonds proceeded to fall through zone 3 (support) to the top band of zone 4 (support).
• The chart shows bonds have bounced back into zone 3 (resistance).
• RSI on the chart shows TLT is oversold. This contributed to the bounce.
• The chart shows there is an RSI divergence.  This indicates that TLT may fall again.
• When the stock market recently began experiencing turbulence, countless investors and investment advisors rushed to buy long bonds.  The reason is that they are stuck in academic and Wall Street orthodoxy that long bonds are a safe haven.  The result of investors and investment advisors not being able to break out of the orthodox thinking is that they lost significant money on a so-called safe haven.  The foregoing is clearly proven from the chart.
• The chart shows when the Fed made an aggressive 50 bps rate cut last year.
• The chart shows that TLT also broke out above the top band of zone 1 (resistance).  At that time, believing that long bonds would go higher, countless investors and investment advisors bought long bonds.
• The chart shows the contrary Arora call at that time that bonds will fall.  The chart shows that the our call has proven spot on, and investors who bought long bonds on the Fed’s aggressive rate cut have experienced significant losses.  
• Recognizing that many investors and investment advisors are not able to break out of the orthodox thinking, in every Morning Capsule, we publish a section titled “Traditional 60/40 Portfolio.” 
• Initial jobless claims came at 215K vs. 225K consensus.

• We have been writing there is no Fed put.  However, the market believed there was a Fed put.  Powell’s statement goes against the market forecast.
• President Trump blasted Powell in a post after Powell saying there is no Fed put.  President Trump wrote, “The ECB is expected to cut interest rates for the 7th time, and yet, ‘Too Late’ Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete ‘mess!’”
• Powell has clearly angered President Trump.  President Trump also posted, “Powell’s termination cannot come fast enough!”
• As a heads up, if President Trump fires Powell, our Protection Band will likely be significantly raised.  
• News about trade negotiations is very important for the markets.  Here are the three pieces of news to focus on.
  • President Trump met with Japanese trade representatives and made good progress.
  • President Trump had a productive call with the President of Mexico.
  • Today, President Trump is meeting with Italy.
• Among earnings, the following are noteworthy:
  • The largest home builder DR Horton Inc (DHI) reported below consensus and is guiding below consensus.
  • The largest health insurer UnitedHealth Group Inc (UNH) reported earnings below consensus and guided below consensus.  UnitedHealth results highlight rising medical costs.
  • The largest semiconductor foundry Taiwan Semiconductor Manufacturing Company  (TSM) reported above consensus and is guiding above consensus.
• Eli Lilly And Co (LLY) reported Phase III data for orforglipron, an oral weight loss drug.  The weight loss is comparable to Wegovy and inline with Wall Street’s expectations of 5% – 6% weight loss.  The pill is also highly effective for diabetes.  Effective, injectable weight loss drugs have been very popular.  The stock market has been waiting for an effective weight loss pill.  Eli Lilly’s results show that a weight loss pill is almost here.  LLY stock is jumping 13% in the premarket.  LLY stock is trading at $829.12 as of this writing in the premarket.  As full disclosure, LLY is in our ZYX Buy Core Model Portfolio, long from $318.45.  There is also a signal in our ZYX Short for short selling Eli Lilly competitor Novo Nordisk A/S (NVO).

Europe

The European Central Bank (ECB) has cut three key interest rates by 25 bps.  The rate cut appears to be influenced by the tariff decisions made by President Trump.

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).

Bitcoin

Bitcoin is range bound.

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.