You may not have heard of Arora's second investment law: no one knows for sure what will happen next.
Still, with the trajectory of the Dow Jones Industrial Average
DJIA, + 0.12%
combined with the uptrend of investors, the benchmark would hit 30,000 points on April 5th. What are the chances of this happening?
I receive a large number of emails from investors. In the Arora report, we pay particular attention to what investors do to compile our exclusive trust indicator. An investor segment behaves as if the current trend continues at the current rate. They buy aggressively. Is aggressive buying cautious? Let's explore with two graphs.
Click here to view the annotated table of the S & P 500 ETF.
SPY, + 0.19%
which represents the S & P 500 index
SPX, + 0.18%
Click here to view the annotated table of DJIA ETF.
DIA + 0.11%
which represents the Dow Jones Industrial Average
DJIA, + 0.12%
Similar conclusions can be drawn from the Nasdaq 100 ETF charts
QQQ, + 0.32%
IWM + 0.41%
Please note the following:
• The second chart shows that if the Dow Jones Industrial Average continued to grow at the current rate, it would reach 30,000 on April 5th.
• The first chart shows that the Arora report gave a buy signal all the way down to Christmas Eve.
• The first chart shows that The Arora Report portfolios were 61% protected before the stock market began to fall.
• The first chart shows Arora's calls before Christmas Eve, indicating that these stockings were not the lowest likely.
• The first graph shows that the volume is relatively low during this rally. Normally, it is negative, but paradoxically, in the current context, it is positive. The reason is that the low volume means that there was not much conviction in this gathering and that the institutions did not jump on board. This means that there is still a lot of fuel to lift the market.
• The graph shows that the resistance zone is above the head.
• The graph shows the support area.
• After a strong recovery, the market often returns to the support zone.
• The Relative Strength Index (RSI) shows that the market is overbought. Overbought markets are vulnerable to withdrawals.
• RSI on the graph shows a negative divergence. Clearly, this means that if the price has gone up, the RSI has gone down. On the surface, it's a negative. However, investors must pay attention to the nuances. In this case, the important nuance to note is that the negative divergence is limited to the overbought area – this is a positive point.
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I was talking about 30,000 Dow when the Dow was about 16,000. At that time, no one else was talking about Dow 30,000. Subsequently, I repeated the call several times. Please see "This is the case for Dow 30,000 in Trump's first term".
Based on what has happened so far since my first call for the Dow 30,000, the Dow now reaches 30,000 is not a big deal. Before you send me emails mistakenly for being a permanent, remember that in March 2009, which turned out to be the beginning of this bull market, the Arora report gave the signal to buy aggressively. This signal was given after the Arora report gave another one in 2007, namely to be 100% protected by cash and blankets. In 2008, the Arora report called for the purchase of inverted ETFs that rise when the market depreciates and systematically sells short. In 2008, when most portfolios lost half of their value, the Arora report generated a positive return of 45.9%.
You can not deny that the Dow will reach 30,000 by April 5 if the current trend continues. You also can not dispute the data that a segment of investors buy aggressively, convinced that the current trend will continue.
Investors who have been present know that markets do not go up straight. This market is ready for a downturn. It is conceivable that the market has a reaction of "selling the news" to any agreement with China. See "You can bet that the trade agreement between the United States and China will not help stocks – here's why."
At the extremes, feeling is a contrary indicator. This means that when the feeling becomes extremely positive, it is a sales signal. Arora Report's Christmas Christmas buy signal was in part due to the fact that our exclusive confidence indicator had reached an extremely negative level.
Right now, the feeling is very strong but not extremely high. This is a kind of "yellow" light before the "red" light.
If the market must continue to climb in a straight line, popular technology stocks such as Apple
AAPL, + 1.13%
AMZN, + 0.18%
FB + 0.38%
AMD + 1.00%
will probably participate. However, smart cash flows in these stocks do not support a linear market. Please see "If you own Apple, Amazon, Facebook or AMD, look below."
What to do now
Yes, the Dow Jones index could reach 30,000 by April 5 if the current trend continues, but the probability is low. Investors must make decisions based on probabilities.
It is prudent to temper aggressive purchases. It is also wise to take advantage of partial profits while maintaining good long-term positions. Consider adding or creating new positions when they dive into the buying areas or as new fundamental developments occur. Investors may also want to focus on evergreen strategies. Please see "Here is an ongoing strategy to make money on an unstable stock market".
Disclosure: Subscribers to the Arora Report may hold positions in the securities mentioned in this article or at any time. Nigam Arora is an investor, engineer and nuclear physicist who founded two of the 500 fastest growing companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be contacted at [email protected]