By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Biden’s Security Plan
Please click here for a chart of oil futures (CL_F).
Note the following:
- The chart shows a big run up in oil. When oil crossed over $90, $100 oil became the consensus in the marketplace.
- As the chart shows, the $100 consensus caused a short squeeze.
- As the chart shows, Biden’s security plan for the Middle East started gaining traction, causing the biggest fall in oil in a year. Biden’s security plan calls for Saudi Arabia to normalize relations with Israel in return for a security pact with the U.S. and other major concessions from the U.S. The presumption is that the result will be Saudi Arabia increasing oil production to help lower oil prices. Considering the presidential election is next year, lowering oil prices with Saudi cooperation is high on Biden’s agenda.
- In The Arora Report analysis, lower oil prices are a positive for the stock market with the exception of oil stocks. The reason is that lower oil prices mean lower inflation.
- In The Arora Report analysis, Middle East politics is very volatile and there does not seem to be enough support in the U.S. Congress to support the security pact with Saudi Arabia at this time. For these reasons, the fall in oil prices could turn out to be temporary.
- Weekly initial jobless claims came at 207K vs. 225K consensus. This indicates that the job picture continues to stay very strong. This strong data caused an immediate uptick in yields and turned money flows in the Magnificent Seven stocks lower. This is important because the stock market is being held up due to the strength in the Magnificent Seven stocks based on AI frenzy.
- Weekly initial jobless claims is a leading indicator and carries heavy weight in our adaptive ZYX Asset Allocation Model with inputs in ten categories. In plain English, adaptiveness means that the model changes itself with market conditions. Please click here to see how this is achieved. One of the reasons behind The Arora Report’s unrivaled performance in both bull and bear markets is the adaptiveness of the model. Most models on Wall Street are static. They work for a while and then stop working when market conditions change.
- The next major data release is the jobs report. The jobs report will be released at 8:30am ET on October 6. The consensus for non-farm private payrolls is 150K. The consensus for the headline is 158K.
- 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.
Weight Loss Drugs
Walmart (WMT) says that people on weight loss drugs are buying slightly less food. The consensus is beginning to develop that weight loss drugs from Eli Lilly (LLY) and Novo Nordisk (NVO) are negative for many med-tech stocks, restaurant stocks, alcohol stocks, and food and beverage stocks. If these predictions start coming true, money will rush out of these stocks and will likely go into artificial intelligence stocks. There is a fortune to be made in artificial intelligence over the next seven years, but it will be treacherous at times. Investors who develop in-depth knowledge of investing in artificial intelligence will do better compared to those who do not. The easiest way to develop your knowledge about investing in artificial intelligence is to listen to the podcasts in Arora Ambassador Club.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Tesla (TSLA) and Nvidia (NVDA).
In the early trade, money flows are negative in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Apple (AAPL).
In the early trade, money flows are mixed 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 *** in the early trade.
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.
The momo crowd is *** oil in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin (BTC.USD) is range bound.
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 range bound.
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 $1833, silver futures are at $21.20, and oil futures are at $83.85.
S&P 500 futures are trading at 4284 as of this writing. S&P 500 futures resistance levels are 4318, 4400, and 4460: support levels are 4200, 4000, and 3950.
DJIA futures are down 77 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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