By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Hotter Inflation
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:
- Consumer Price Index (CPI) came hotter than the consensus. Here are the details of the month-over-month numbers:
- The headline number came at +0.1% vs. – 0.1% consensus.
- Core CPI came at 0.6% vs. 0.3% consensus.
- The chart shows the release of the CPI data.
- Note the wide range of the bar.
- The high of the bar occurred just before the number was released at 8:30 am ET.
- Momo crowd buying became more and more aggressive as 8:30 neared in hopes of lower inflation.
- Momo buying was most aggressive in the seconds before the release of the number.
- The momo crowd buying ran the market well above the high band of the micro support/resistance zone shown on the chart.
- The super aggressive buying this morning was on top of the aggressive momo buying over the last four days on hope strategy as shown on the chart.
- As of this writing, the market has fallen below the low band of the micro support/resistance zone.
- We have been emphasizing that hope is never a good strategy. Today the truth of this statement is on vivid display.
- We have previously shared with you that investors should focus on month-over-month numbers and not year over year.
- Momo gurus have been proven very wrong again. They now have a new narrative to persuade you to buy stocks – year over year, inflation was 8.3% in August down from 8.5% in July and 9.1% in June. This is the new song to cheer aggressively buying stocks.
- There is a dramatic change in Fed funds futures.
- The probability is 80% of a 75 basis point hike in the key interest rate.
- The probability is 20% of a 100 basis point hike in the key interest rate.
- Smart money sold on the news.
- The Arora Report members are well positioned. Please pay attention to the changes in the low band of the short-term hedges in the Protection Bands and What To Do Now? section below.
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 🔒 stocks in the early trade.
Gold
Gold is being sold on a stronger dollar as gold is priced in dollars.
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 🔒 in oil in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin is being sold along with speculative stocks.
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 $1709, silver futures are at $19.47, and oil futures are $87.54.
S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.
DJIA futures are down 581 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 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 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.
