By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Hotter PPI
Please click here for a chart of China ETF ASHR.
Note the following:
- The Arora Report has been warning you for a while that the worsening relationship between the U.S. and China is a risk that long term, prudent investors need to take into account.
- Biden has soured the stock market sentiment by calling the Chinese economy a “ticking time bomb.” Biden also called the Communist Party’s leaders “bad folks.”
- Biden also jabbed China’s President Xi by calling his signature Belt and Road Initiative the “debt and noose.”
- The chart shows that unlike in the U.S., the AI rally in China did not sustain itself. Chinese companies are spending as heavily on AI as U.S. companies, but the AI frenzy has not taken hold among investors in China as it has among investors in the U.S.
- The chart shows the downward sloping trendlines in the Chinese stock market. In contrast, there are upward sloping trendlines in the U.S. stock market.
- Producer Price Index (PPI) came hotter than expected. Here are the details:
- Headline PPI came at 0.3% vs. 0.2% consensus.
- Core PPI came at 0.3% vs. 0.2% consensus.
- There were whisper numbers that core PPI would come below the consensus due to lower PPI in China. American producers are highly dependent on Chinese imports.
- In The Arora Report analysis, the rise in PPI runs counter to momo gurus’ bullish narrative that inflation is over and done with and the Fed is going to cut interest rates.
- Please click here for a chart of yesterday’s stock market price action. The price action shown on the chart is negative from a technical perspective. There is concern that the stock market in the U.S. ran up yesterday morning after the release of CPI but smart money sold into the strength generated by momo buying, causing a reversal. The sell off was aided by the poor Treasury auction. Please read the Afternoon Capsule for details.
- Investors may consider watching 7-10 year Treasury ETF IEF and long bond Treasury ETF TLT.
- 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.
Magnificent Seven Money Flows
In the early trade, money flows are negative in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).
In the early trade, money flows are negative in S&P 500 ETF SPY and mixed in 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 🔒 in the early trade.
For longer-term, please see gold and silver ratings.
Oil
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) is range bound.
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 $1947, silver futures are at $22.73, and oil futures are at $83.28.
S&P 500 futures are trading at 4471 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 down 55 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.
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.
