By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
New Economic Data
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows tech stocks have fallen back into the support zone.
- RSI on the chart shows tech stocks are near oversold.
- The stock market has a consensus now that everything is going to be immaculate – the landing, the Fed, interest rates, earnings, adoption of AI, Russia, China, and the Middle East.
- The stock market is assuming a 90% probability of seven rate cuts.
- The stock market is going to face new economic data today:
- ISM Manufacturing Index will be released at 10am ET. The consensus is 47.1%.
- JOLTS report will be released at 10am ET.
- The stock market will also face minutes from the last FOMC meeting at 2pm ET. Powell was dovish in the press conference, flipping 180 degrees. At The Arora Report, we will be reading the Fed minutes to see if the 180 degree flip was unanimous or if there was dissension.
- If the new data and the Fed minutes are supportive of immaculate everything, expect a rip roaring rally and new highs.
- If the data is not supportive of immaculate everything, expect momo gurus to come up with a new narrative to try to run up the stock market.
- Market mechanics are neutral as of this writing in the premarket but can easily swing in either direction after the data and Fed minutes.
- Richmond Fed President Tom Barkin has made two key points this morning:
- Rate hikes are not off the table.
- The soft landing is at risk.
- 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.
- There is selling in the early trade but money flows in indexes are positive. See below.
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Magnificent Seven Money Flows
In the early trade, money flows are positive in Apple (AAPL), Tesla (TSLA), and Amazon (AMZN).
In the early trade, money flows are neutral in Nvidia (NVDA) and Microsoft (MSFT).
In the early trade, money flows are negative in Alphabet (GOOG) and Meta (META).
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 *** 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
Yesterday, we wrote:
There is a rumor that a bitcoin (BTC.USD) ETF will be approved as soon as tomorrow. The rumor has driven bitcoin above the key level of $45,000. The SEC has until January 10 to make a decision on bitcoin ETFs.
This morning there is rumor that the SEC may reject spot bitcoin ETF. Bitcoin fell as low as $40,968. Buyers came in at the low, and bitcoin has since recovered to above $42,000.
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 $2051, silver futures are at $23.27, and oil futures are at $70.96.
S&P 500 futures are trading at 4769 as of this writing. S&P 500 futures resistance levels are 4826, 4852, and 4918: support levels are 4713, 4600, and 4460.
DJIA futures are down 145 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 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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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.
