By Nigam Arora & Dr. Natasha Arora

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

Hotter CPI

Please click here for a chart of the Consumer Price Index (CPI).

Note the following:

  • June Core Consumer Price Index came at 0.9% vs. 0.5% consensus.The headline CPI also came at 0.9% vs. 0.5% consensus.
  • The data indicate that inflation is running much hotter than the consensus.
  • For investors, it is important to take a look at CPI over a long term.  This is the reason the chart shows CPI over the last 20 years.
  • Note from the chart the latest spike in CPI.
  • Also, note from the chart that the CPI now has roughly reached the same level as it reached at the time of the stock market crash in 2008. During the 2008 crash, most portfolios invested in blue chips lost over one-half of their value.  Those invested in speculative stocks lost a lot more.The Arora Report subscribers were in cash and fully hedged before the crash.  Then using inverse ETFs, The Arora Report subscribers generated a return of over 40% when the stock market was cut in half.
  • The foregoing is just one important observation.  In 2008, the cause of the crash was the housing market bubble.  Now many conditions are different.
  • In 2008, the Fed was not pumping air into the stock market like they are now. Also, the government was not borrowing recklessly like they are now. The momo crowd was not in control like they are now.
  • This report will put pressure on the Fed to start tapering.  In plain English,  tapering means reducing money printing.  Investors need to keep upfront and center that the Fed is buying $40 billion a month of mortgages on the pretext of preventing house prices from crashing.  Unless you have been under a rock, you already know that house prices have been rising at the fastest pace in recent history.  How does the Fed printing money to buy $40 billion of mortgages a month to support house prices even make sense?
  • Nobody including the Fed has been able to answer the question posed above. Yet, the Fed persists with the policy the was made when the country was locked down, the stock market was crashing and there was no vaccine.
  • Anybody who is objective already knows that a big reason behind the stock market rise has been money printing and other Fed policies. If the Fed were to become objective and reduce pumping air into the stock market, this will hurt the stock market.
  • The Fed will likely continue to claim that inflation is transitory.

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 🔒.

Gold

The momo crowd is 🔒 in gold in the early trade.  Smart money is 🔒.

For longer-term, please see gold and silver ratings.

Oil

The momo crowd is 🔒 oil in the early trade.  Smart money is🔒.

For longer-term, please see oil ratings.

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 $1802, silver futures are at $26.05, and oil futures are $73.70.

S&P 500 futures resistance levels are 4400 and 4460: support levels are 4318, 4200, and 4000.

DJIA futures are down 36 points.

Protection Bands and What To Do Now?

It is important for investors to look ahead and not in the rearview mirror.

Consider continuing to hold existing positions. Based on individual risk preference, consider holding 🔒 in cash or treasury bills or short-term bond funds 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.

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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.