Stock Buying on Hassett as Potential Fed Chair; AI Drives Copper Demand

Stock Buying

Please click here for an enlarged chart of United States Copper Index Fund (NYSE:CPER).

Note the following:

• The chart shows copper has been moving higher and is now approaching the top band of zone 1 (resistance).
• There are large money flows into copper as AI drives copper demand.
• As full disclosure, Copper ETF CPER as well as State Street SPDR S&P Metals & Mining ETF (NYSE:XME) and are in our portfolio.  Major copper producer FCX is also in our portfolio.  As full disclosure, included in our ZYX Buy, is buyout target First Quantum Minerals Ltd (OTC:FQVLF).
• The momo crowd is aggressively buying stocks on President Trump indicating that Kevin Hassett is the potential new Fed chair.  In our analysis, Hassett is highly qualified, charismatic, and close to President Trump.  Hassett will be a great choice, who can potentially pull off the difficult feat of doing President Trump's bidding while still maintaining some credibility for the Fed.
• ADP data is bringing in selling in the stock market.  ADP is the largest private payroll processor in the country.  ADP uses its data to provide a glimpse of the official jobs report.  The release of the official jobs report is delayed from the government shutdown until December 16.  ADP Employment Change came at -32K vs. 20K consensus.
• Bond yields are falling on the weak ADP report.
• Just before this publication, stock futures began to sell off on a report that Microsoft Corp (NASDAQ:MSFT) is lowering sales quotas for new AI products.
• PCE, the Fed's favorite inflation gauge, will be released Friday morning.

India

The Indian rupee is hitting a low based on the data going back to 1957.  The reason is U.S. tariffs are hurting the currency.  Russian President Putin is about to visit India.  Investors should carefully watch how President Trump reacts.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  It is important to pay attention to early money flows in the Mag 7 stocks on a daily basis. 

In the early trade, money flows are positive in Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are neutral in Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corp (NASDAQ:NVDA), and Apple Inc (NASDAQ:AAPL).

In the early trade, money flows are negative in Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), and Microsoft Corp (NASDAQ:MSFT).

In the early trade, money flows are negative 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 (NYSE:USO).

Oil

API crude inventories came at a draw of 2.48M barrels vs. a prior draw of 1.9M barrels.

Bitcoin

There was aggressive buying in bitcoin Bitcoin (CRYPTO: BTC) yesterday and early this morning.  However, just before this publication a whale appears to have started selling.

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.