TACTICAL TARGET IS S&P 500 4100-4200 – LONG WAY TO GO FOR INFLATION TO COME DOWN TO FED’S TARGET

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

Changes In Guidance

Please see the Morning Capsule and the post on hedges for change in guidance about cash levels and hedges.

Please scroll down to see change in guidance about nibbling as well as buy zones and buy now ratings.

Tactical Target

Please click here for a chart of Nasdaq 100 ETF (QQQ).

Note the following:

• In yesterday’s Afternoon Capsule, we wrote,

Due to the split positioning, a move of 3% – 7% in the stock market can easily occur if the CPI data is far from consensus.  Whichever direction the market starts moving, algorithms will exaggerate the move in that direction.

• The call has proven spot on.
• The chart shows as of this writing QQQ is up 6.21% for the day.
  • S&P 500 is up 4.64%.
  • DJIA is up 3.07%.
  • Nasdaq 6.12%.
• The chart shows that the rally started on the release of better than expected CPI data.
• The chart shows when the Treasury auction results were announced.
• The Treasury auction was strong. Here are the results:
  • $21B 30-year Treasury bond auction
  • High yield: 4.080% (When-Issued: 4.113%)
  • Bid-to-cover: 2.42
  • Indirect bid: 69.9%
  • Direct bid: 20.4%
• The last two times there were 6% gains in Nasdaq, it marked the end of bear markets in 2020 and 2018.  Having said that, more than 6% Nasdaq gains were seen twice in October 2008, in May 2002, in April 2001, and in December 2000 – every time the market made a lower low.
• The Fed has been on the record that the Fed will need to see several months of good inflation data.  Today is the first month.
• There is a long way to go for inflation to come under control.
• Assuming there is no new negative data between now and going into the next CPI release in December, the base case is for S&P 500 to reach 4100 – 4200.  As a reference, S&P 500 is at 3924 as of this writing.
• In The Arora Report analysis, based on current interest rates and our earnings projections, at S&P 500 level of 4100 – 4200, the market starts reaching a valuation ceiling.  
• Keep in mind that the momo crowd does not care about valuations.  If December CPI data is good, the market can run to S&P 500 4500 before the year end.
• There is still a fair probability of S&P 500 reaching 3200 after the rally sometime in 2023.  
• For the foregoing reasons, it is important for investors to understand the difference between tactical and strategic positions.  To learn more about tactical and strategic positions, please scroll down.  
• From a very long term point of view, keep in mind that four mega trends fueling the 40 year long secular bull market have ended.  Going forward, to be successful, you will need to trade and invest differently compared to the last 40 years.  Due to the importance of this matter for very long term investors, we are conducting a special live event to help investors.  
• The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.
• The VUD indicator is mostly green, indicating net demand for stocks.

Money Flows

The momo crowd money flows since the Morning Capsule are 🔒 (To see the locked content, please take a 30 day free trial) .

Smart money flows since the Morning Capsule are 🔒.

Short squeeze money flows are extremely 🔒.

A Special Note To New Subscribers

Note the smart money behavior.  Smart money tends to sell into strength on strong up days.

New subscribers should consider adopting smart money’s way of investing and trading.

Sentiment

Sentiment is 🔒.

Sentiment is a contrary indicator at extremes.  In plain English, this means that when sentiment becomes extremely positive it is time to sell and when sentiment becomes extremely negative it is time to buy.

Close

There appear to be buy on close orders.

There is merit to watching the pattern of market on close orders as they represent the day’s dominant net cumulative activity by many professionals and funds.

Gold

The momo crowd money flows in gold are 🔒 since the Morning Capsule.

Smart money flows are 🔒 in gold since the Morning Capsule.

Oil

The momo crowd money flows in oil are 🔒 since the Morning Capsule.

Smart money flows in oil are 🔒 since the Morning Capsule.

Buy Zones And Buy Now Ratings

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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.