FED’S FAVORITE INFLATION GAUGE RISES BY MOST IN A YEAR, BITCOIN SOARS, PUTIN’S NUCLEAR THREAT

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By Nigam Arora & Dr. Natasha Arora

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

Inflation Gauge

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 has failed to make progress since the release of hotter CPI.
  • The chart shows that the stock market was pulling back before the release of PCE, but improved on release of PCE.
  • The stock market has been anxiously awaiting PCE.  PCE is the Fed’s favorite inflation gauge.  PCE rose the most in a year.  Here are the details:
    • Headline PCE came at 0.3% vs. 0.4% consensus.
    • Core PCE came at 0.4% vs. 0.4% consensus.
  • In The Arora Report analysis, the stock market improved on the release of the PCE data as there was fear of an even worse number.
  • Digging into the data that underlies PCE, in The Arora Report analysis, there is deflation in goods, but there is serious inflation in services.  Deflation in goods is coming from China.  This shows that The Arora Report’s prior calls on inflation are spot on.   
  • The release of PCE data has triggered aggressive buying in AI stocks and bitcoin. The buying is especially aggressive in C3.ai (AI) after the release of PCE data.  C3.ai released better than expected earnings after the close yesterday.  A signal was given in ZYX Buy.  The trade is now profitable.
  • The release of PCE data is also leading to very aggressive buying in small caps.  Small cap ETF IWM and its buy zone are in ZYX Allocation Core Model Portfolio.
  • Personal income and spending data was also released this morning.  Here are the details:
    • Personal spending came at 0.2% vs. 0.2% consensus.
    • Personal income came at 1.0% vs. 0.5% consensus.
  • Weekly initial claims came at 215K vs. 206K consensus.  This indicates that the jobs picture remains strong, especially at the low end.  However, the jobs picture is getting weaker in IT as many jobs are being replaced by AI.
  • Yesterday, the Fed’s Williams, Collins, and Bostic said that the Fed will continue to be date dependent.  Bostic said that he sees the first rate cut this summer, while Collins and Williams see the first rate cut later in 2024.
  • More Fed speak is ahead today from Fed Presidents Raphael Bostic,  Austan Goolsbee, and Loretta Mester.
  • 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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Japan

As we have been writing, prudent investors need to pay attention to Bank of Japan policies.  Not only is the Japanese stock market hitting a new 34 year high, but interest rates and movements in Japan impact the U.S. stock market.

Bank of Japan board member Hajime Takata signaled a strong case for raising interest rates.  The yen jumped.  For buy zones of Japanese positions in ETFs EWJ and FXY, please see ZYX Allocation Core Model Portfolio.

Russia

Putin is warning that if the West directly intervenes in Ukraine, it risks nuclear war.  Putin’s comments are in response to a comment by French President Macron that NATO could send forces to Ukraine.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Meta (META), Nvidia (NVDA), Microsoft (MSFT), and Tesla (TSLA).

In the early trade, money flows are neutral in Apple (AAPL) and Alphabet (GOOG).

In the early trade, money flows are negative in Amazon (AMZN).

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.

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) soared to $64,000 yesterday before pulling back.  Release of PCE data brought aggressive buying into bitcoin.  Bitcoin is now approaching $64,000 again.

Irrespective of your opinion of bitcoin, money is to be made in bitcoin.  To make money in bitcoin and not become a sacrificial lamb for bitcoin whales, you need to learn the secrets of bitcoin whales.  Whales closely guard these secrets.  The best way to learn these secrets is to listen to the three part series “WHALES’ SECRETS YOU NEED TO KNOW: CAPTURING BITCOIN PROFITS” For those interested in access to this series, please email ambassador@thearorareport.com.

See also  AGGRESSIVE BUYING IN SILVER AS POWELL ITCHING TO CUT RATES

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 and bonds are range bound.

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 $2057, silver futures are at $22.92, and oil futures are at $78.62.

S&P 500 futures are trading at 5097 as of this writing.  S&P 500 futures resistance levels are 5210, 5400, and 5500 : support levels are  5020, 4918, and 4852.

DJIA futures are up 89 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.

See also  NVIDIA FALLS BELOW TRENDLINE, FED’S WALLER IN NO RUSH TO CUT RATES

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.

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This post was just published on ZYX Buy Change Alert.

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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.

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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