By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Record Black Friday
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 levitating right under the mini resistance zone.
- If the stock market breaks above the mini resistance zone, the next target is the resistance zone shown on the chart.
- The consensus among permabulls is that in December the stock market will rocket to the resistance zone shown on the chart.
- In The Arora Report analysis, there is a reasonable probability that permabulls will be right, but it will depend upon the new data that is ahead.
- Prudent investors should consider being neither permabulls nor permabears but depending on the data.
- Supporting permabulls’ case is that consumers splurged on Black Friday. According to Adobe Analytics, consumers spent a record $9.8B online on Black Friday. This is 7.5% higher than last year.
- Overall, Black Friday sales rose 2.5% year-over-year according to Mastercard.
- How are consumers paying for the splurge? In addition to maxing out their credit cards, consumers are extensively using buy now pay later.
- Foot traffic in retail stores rose by 2.1% year-over-year.
- Various reports estimate foot traffic in stores rising by 2% – 5% year-over-year.
- The expectations are for Cyber Monday to generate about $12B of sales online. This estimate is over 5% higher compared to last year.
- Investors are rushing to buy stocks of Affirm (AFRM) and Shopify (SHOP). Affirm is a large provider of buy now pay later services. Shopify software runs a large number of e-commerce websites.
- Investor enthusiasm over the consumer borrowing more and spending record amounts is being tempered in the early trade by data from China.
- October Industrial Profits in China fell by 7.8% year-to-date. Initially, U.S. stock futures were lower on the data from China, but then buying came in on enthusiasm about consumers’ splurge.
- Liquidity in the stock market is low.
- 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 positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Tesla (TSLA), and Apple (AAPL).
In the early trade, money flows are negative in Alphabet (GOOG) and Meta (META).
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
Gold is above the psychologically important level of $2000.
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
There appear to be several disagreements among OPEC+ members. This is pushing oil lower.
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 ***. Whichever way the market starts moving, Wall Street machines will easily push it farther that way as liquidity is low. 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 down, and bonds are ticking up.
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 $2011, silver futures are at $24.83, and oil futures are at $74.93.
S&P 500 futures are trading at 4562 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 61 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.
