By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Barn Burner Jobs Report
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- The chart shows that the stock market is rallying on the jobs report.
- The chart shows that the stock market is above the support/resistance zone.
- The just released jobs report is a barn burner. The report is a lot stronger than the consensus. Here are the details of the jobs report:
- Nonfarm payrolls came at 254K vs. 135K consensus.
- Nonfarm private payrolls came at 223K vs. 125K consensus.
- Average hourly earnings came at 0.4% vs. 0.3% consensus.
- Average work week came at 34.2 hours vs. 34.3 hours consensus.
- Unemployment rate came at 4.1% vs. 4.2% consensus.
- At a minimum, this data point shows that Powell could have been wrong. When Powell cut interest rates by 50 bps, he explained it away by predicting labor weakness. The just released jobs report shows that there is no labor weakness.
- Before and after the 50 bps rate cut, we shared with you The Arora Report analysis that the data did not support a 50 bps rate cut. Today’s jobs report clearly proves that The Arora Report analysis was correct and the Fed may have made a mistake. For the last 17 years, almost every time The Arora Report has been different from the Fed, subsequently The Arora Report analysis has proven correct.
- Bonds are falling on the strong report.
- Stocks are seeing extremely aggressive buying after the report. In the short term, it is bullish in that Powell gave the stock market a big gift of a 50 bps cut predicting labor weakness, but there is no labor weakness.
- After the jobs report, AI stocks are ripping. In the early trade, buying is extremely aggressive in AI stocks.
- This data is going to be ammunition for those who have been saying that the 50 bps rate cut was designed to help Harris win the election even though the Fed continues to publicly say that the Fed does not consider politics. Keep in mind, Trump has said that he would not reappoint Powell.
- Adding to the optimism is that dock workers have suspended their strike.
- In the longer term, this jobs data raises the probability that inflation will not come down to the Fed’s 2% target and the Fed will once again be proven wrong.
- As a note of caution, this is only one piece of data. At The Arora Report, we will be carefully watching additional pieces of new data as it comes. This is exactly what prudent investors should do.
- ISM Non-Manufacturing Index yesterday came at 54.9 vs. 51.6 consensus. In The Arora Report analysis, this data also shows that the economy is strong.
- 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.
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.
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.
Gold
Gold is seeing selling on strong jobs data.
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
Oil is seeing buying on strong jobs data.
The momo crowd is *** in oil in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is seeing buying on strong jobs data.
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 up, and bonds are ticking down.
The dollar is stronger.
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 $2653, silver futures are at $31.81, and oil futures are at $74.15.
S&P 500 futures are trading at 5797 as of this writing. S&P 500 futures resistance levels are 5926 and 6017 : support levels are 5748, 5622, and 5500.
DJIA futures are up 257 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.
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.
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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.
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.