By Nigam Arora & Dr. Natasha Arora

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

What Recession?

Please click here for a chart of retail ETF XRT.

Note the following:

  • The U.S. economy is about 70% consumer based.  For this reason, prudent investors pay close attention to retail sales.
  • The chart shows a strong move up in retail ETF XRT so far in 2023.
  • The chart shows XRT made a higher low in December.
  • The chart shows XRT is at a critical point relative to the trendline.  A dip below the trendline will be negative.
  • The chart shows that XRT is approaching resistance.
  • RSI shown on the chart is overbought and flattening, indicating that upward internal momentum has stalled.
  • Retail sales during the all important holiday season did not hold up as well as bulls had hoped.  Bulls were hoping for better than consensus numbers.  The data just released shows worse than consensus numbers.  Here are the details:
    • Retail sales came at -1.1% vs. -0.8% consensus.
    • Retail sales ex-auto came at -1.1% vs. -0.5% consensus.
  • In the premarket, stocks initially jumped on better than expected Producer Price Index (PPI) data.  Here are the details:
    • PPI came at -0.5% vs. -0.1% consensus.
    • Core PPI came at 0.1% vs. 0.1% consensus.
  • In The Arora Report analysis, we were expecting better than consensus PPI numbers.  The reason is that there is a glut of goods for two reasons.
    • Retailers bought based on the trends during the pandemic.
    • Consumers binged on buying goods during the pandemic but have now shifted to services.
    • As a result of the foregoing, there is excess inventory in the system and prices are falling.
  • In The Arora Report analysis, investors need to focus on inflation in core services, especially wages outside tech and Wall Street. 
    • Wages in tech are falling, simply because large tech companies grew too fat.  Large tech companies were making so much money that they lost spending discipline.
    • Bonuses on Wall Street are likely to be reduced drastically compared to last year.
    • Outside tech and Wall Street, wages are sticky.

40/60 Portfolio

Many traditional portfolios are 60/40 portfolios or a variant thereof – 60% stocks and 40% bonds.

The Arora Report call going into 2022 was to not hold any bonds.  As a matter of fact, our call was to buy inverse bond ETFs such as TBT and TBF.  Just like most of our macro calls over the years, that call went against the prevailing wisdom and turned out to be very profitable for our members.  

2022 was the worst year for bonds on the record.  The Arora Report members avoided the pain.  However, investors who were not members of The Arora Report lost big on bonds that they thought were going to protect their gains against losses in stocks.  

Now that bonds have fallen, inflation is receding, and there is a threat of a recession, it makes sense to look at bonds.  Many very intelligent and well informed investors are flipping the traditional 60/40 to 40/60 – 40% in stocks and 60% in bonds.

Many smart investors are buying 30 year bonds.

In The Arora Report analysis, the probability adjusted risk reward in such an approach is not favorable to take strategic positions.  When appropriate, with proper timing, it does make sense to take tactical positions in bond ETFs such as TLT.  To learn more about strategic vs. tactical, please scroll down in the Afternoon Capsule.

To see our present guidance on the 60/40 portfolio for those who want to stick to a 60/40 portfolio, please scroll down.     

Surprise From Japan

In a surprise, Kuroda dug in.  Bank of Japan (BOJ) left policy unchanged.  There was intense speculation that BOJ would change policy.  Stocks in Japan responded immediately with Nikkei 225 running up 2.5%.


For the second month in a row, inflation in the U.K. came down.


In yesterday’s Afternoon Capsule, we shared with you that Microsoft was planning large layoffs.  About 11,000 employees and many more contractors are likely to be laid off.  Investors are excited and buying Microsoft stock on the news in spite of a downgrade and potentially lower revenues.

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.



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.


Whales are maintaining bitcoin above $21,000.


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 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 $1924, silver futures are at $24.36, and oil futures are at $81.82.

S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3680.

DJIA futures are up 57 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 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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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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