By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Important Data Ahead
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows that Nasdaq 100 has pulled back after touching the low band of the resistance zone.
- The chart shows that the stock market is consolidating around the downward sloping trendline.
- The chart shows that RSI is neither overbought nor oversold.
- In The Arora Report analysis, from a technical perspective, the stock market is positioned such that it is waiting for the new economic data that is ahead.
- Important data is ahead.
- JOLTS – job openings data will be released at 10am ET.
- Consumer confidence data will also be released at 10am ET.
- ADP employment change will be released on Wednesday at 8:15am ET.
- Thursday will bring initial jobless claims, GDP-second estimate, personal income and spending, and most importantly PCE prices. PCE is the Fed’s favorite inflation gauge.
- On Friday, the mother of all numbers will be released – the jobs report.
- Medicare has released the list of 10 drugs that it is targeting for price reduction. All of the drug companies are expected to litigate. The impacted drug companies are Bristol-Myers (BMY), Johnson & Johnson (JNJ), Merck (MRK), AstraZeneca (AZN), Novartis (NVS), Amgen (AMGN), AbbVie (ABBV), and Novo Nordisk (NVO).
- In The Arora Report analysis, the list of 10 drugs is mostly inline with expectations, and as such, do not expect it to impact the stocks of these companies in a major way.
- Today, Tesla (TSLA) is turning on a massive Nvidia (NVDA) cluster consisting of 10,000 H100 GPUs. The cluster will be used to train FSD (Full Self-Driving). Tesla is also spending $1B to build its own Dojo supercomputer.
- 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.
Many companies are pushing their employees to come to the office. A shift away from working at home is taking place. The latest is Amazon’s (AMZN) CEO Andy Jassy warning remote workers, “It’s probably not going to work out for you.” This has broader implications including on cities, office real estate, consumer spending, and travel.
Magnificent Seven Money Flows
In the early trade, money flows are negative in Amazon, Tesla, Nvidia, 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.
There is a serious attempt underway to persuade retail investors to buy silver.
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 just below $26,000 as the trading volume is drying up.
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 $1943, silver futures are at $24.30, and oil futures are at $80.60.
S&P 500 futures are trading at 4439 as of this writing. S&P 500 futures resistance levels are 4460, 4600, and 4713: support levels are 4400, 4318, and 4200.
DJIA futures are down 40 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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