INFLATION DATA GOES AGAINST IMMACULATE EVERYTHING DREAM OF STOCK MARKET BULLS, BITCOIN ETFS APPROVED

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By Nigam Arora & Dr. Natasha Arora

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

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:

  • The chart shows that after dipping below the resistance zone, the stock market has moved up close to the top band of the resistance zone.  From the traditional technical analysis perspective, this is a positive.
  • The chart shows that RSI did not dip into the oversold zone before bouncing.  From a traditional technical analysis perspective, this is a positive.
  • There have been two reasons the stock market has been running up this week:
    • The breakout in Nvidia (NVDA) reigniting the AI frenzy
    • Whisper number of CPI coming below the consensus
  • This morning, the momo crowd was aggressively buying stocks before the release of the CPI data in anticipation of S&P 500 making a new high and S&P 500 running towards 5000 after release of the CPI data.
  • This morning, momo gurus’ whisper numbers have proven to be far off the mark. This is nothing new.  Momo gurus are almost always wrong in their analysis.
  • CPI data came hotter than the consensus and much hotter than the whisper numbers.  Here are the details:
    • Headline CPI came at 0.3% vs. 0.2% consensus.
    • Core CPI came at 0.3% vs. 0.2% consensus.
    • The data is inline with The Arora Report expectations.  We have been sharing with you that inflation is not going to come down in a straight line and the market’s estimate of six rate cuts in 2024 may prove to be too optimistic.
    • The data goes against the stock market bulls’ dream of immaculate everything.
  • Initial jobless claims also came hotter than expected. Initial claims came at 202K vs. 209K consensus.  This data also goes against the immaculate everything scenario. Initial claims is a leading indicator and carries heavy weight in our adaptive ZYX Asset Allocation Model with inputs in ten categories.  In plain English, adaptiveness means that the model changes itself with market conditions.  Please click here to see how this is achieved.  One of the reasons behind The Arora Report’s unrivaled performance in both bull and bear markets is the adaptiveness of the model.  Most models on Wall Street are static.  They work for a while and then stop working when market conditions change.
  • As is always the case, expect momo gurus to come up with a new narrative as to why you should ignore the data and buy stocks.
  • 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.
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Iran

Iran has seized an oil tanker adding to tensions in the Middle East.  As of this writing, the momo crowd is oblivious but prudent investors should pay attention.

Layoffs

Yesterday, we shared with you:

Tech layoffs are beginning again.  Here are two examples:

  • Twitch, owned by Amazon (AMZN), is laying off 35% of its staff.

  • Unity (U), a software developer for gaming and the metaverse, is laying off 25% of its staff.

Now, Google (GOOG, GOOGL) is laying off hundreds of people from its engineering, digital assistant, and hardware teams.  Google is being adversely impacted by AI.

Amazon is also laying off hundreds of people across various divisions.  These jobs are also being adversely impacted by AI.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon.

In the early trade, money flows are neutral in Nvidia, Microsoft (MSFT), Alphabet, and Meta (META).

In the early trade, money flows are negative in Tesla (TSLA) 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.

Gold

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

For longer-term, please see oil ratings.

Bitcoin

Eleven bitcoin ETFs have been approved.  Bulls are expecting that this approval will lead bitcoin (BTC.USD) first to $65,000 and then to $100,000.  Many bitcoin promoters are out promoting bitcoin targets ranging from $600,000 to $1.5M.  Bears are expecting a delayed sell the news reaction.

See also  AI HYPE MEETING REALITY, FED UNDER POLITICAL PRESSURE TO CUT RATES QUICKLY

There is too much hype about bitcoin.  There is one important fact that is going to change bitcoin with the ETF approvals – the influence of the whales in manipulating bitcoin.

There are several truths about bitcoin that no one is talking about because they go against bitcoin promoters’ and whales’ interests.  If you are serious about making money in bitcoin or want to understand what is really going on, you need next level information.  We are working on a podcast to provide you with the next level information that is otherwise not available to the public.

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 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 $2033, silver futures are at $23.14, and oil futures are at $72.72.

S&P 500 futures are trading at 4810 as of this writing.  S&P 500 futures resistance levels are 4852, 4918, and 5020: support levels are 4770, 4713, and 4600.

DJIA futures are down 95 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.

See also  PAY ATTENTION: A MAJOR RISK EVENT IS AHEAD – NVIDIA EARNINGS

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 seven 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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