INVESTORS ANTICIPATE SIX RATE CUTS IN EUROPE, ADP DATA SUPPORTS GOLDILOCKS, UNIT LABOR COSTS FALL

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By Nigam Arora & Dr. Natasha Arora

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

Goldilocks

Please click here for a chart of Germany’s DAX futures (DAX_F).

Note the following:

  • Germany is the economic engine of Europe.
  • The chart shows a very strong stock rally in Germany.
  • RSI on the chart shows that after the strong rally, stocks have become overbought.
  • The chart shows that technical resistance is ahead.
  • In The Arora Report analysis, consensus is building among investors that the European Central Bank (ECB) will cut rates six times by a quarter point each in 2024.  
  • In The Arora Report analysis, there is a high probability of ECB beginning rate cuts before the Fed.  
  • The newly released ADP data supports a Goldilocks economy.  ADP is the largest payroll processor in the country and uses its data to give an advanced glimpse of the jobs picture ahead of the official jobs report that will be released on Friday at 8:30am ET.
    • ADP employment change came at 103K vs. 127K consensus.
  • There is more good news for the stock market but not so much for working people.
    • Q3 Unit Labor Costs-Rev. came at -1.2% vs. -0.8% consensus. Unit labor costs going down is a big positive for the stock market.  
  • Productivity in the U.S. has taken a remarkable jump.
    • Q3 Productivity-Rev. came at 5.2% vs. 4.8% consensus.
  • The increase in productivity and the decline in unit labor costs are great news for the U.S. as a country and for the stock market.  Expect gurus to spin this data as increased productivity due to artificial intelligence.  Don’t fall for it.  Artificial intelligence has not yet become pervasive in the U.S. economy.  However, artificial intelligence will become pervasive over the coming seven years, and it will further boost productivity.  A fortune is to be made over the next seven years in artificial intelligence.  Our long experience with thousands of investors has shown that those with more knowledge and preparation perform significantly better than those with less knowledge, even with the same signals.  A large number of our members recognized this and for years were requesting us to help in a manner that is easy and not too time consuming.  This is the reason we started Arora Ambassador Club, to help our members.  Arora Ambassador Club has now been operating for two years and has received rave reviews.
  • 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.
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For The First Time Ever

We have been sharing with you that India represents one of the best large economy opportunities outside the U.S. for long-term investors.  We recently shared with you the recent election results and our analysis that it was very positive.  Now, for the first time ever, the Indian stock market’s total capitalization has hit $4 trillion.

ZYX Emerging has covered India for 16 years in its Core Model Portfolio.  In addition to the Core Model Portfolio, ZYX Emerging also has a separate portfolio of specialty ETFs.  One of the specialty ETFs representing small caps in India (SMIN) is up 31.2% year to date.

Magnificent Seven Money Flows

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

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 *** stocks in the early trade.

Gold

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

For longer term, please see gold and silver ratings.

Oil

API crude inventories came at a build of 0.594M barrels vs. a consensus of a draw of 2.267M barrels.

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) has crossed $44,000 as of this writing.

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Markets

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.

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.

Gold futures are at $2047, silver futures are at $24.55, and oil futures are at $71.02.

S&P 500 futures are trading at 4595 as of this writing.  S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.

DJIA futures are up 103 points.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding *** in cash or Treasury bills 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.

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.

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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 seven 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.

To take a free 30-day trial to paid services to gain access to more opportunities, please click here.

This post was just published on ZYX Buy Change Alert.

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Picture of Nigam Arora

Nigam Arora

Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.

Picture of Dr. Natasha Arora

Dr. Natasha Arora

Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.

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