By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Buying On Jobless Claims
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 the stock market is consolidating in the support zone.
- Investors should carefully watch if the stock market breaks above the support zone or below the support zone.
- The chart shows that RSI is oversold. Oversold markets tend to bounce.
- The chart shows that the stock market was on the verge of dropping the day before yesterday.
- The chart shows that the market rallied earlier in the day yesterday on the Bank of Japan (BOJ) statement that the BOJ would not raise rates when financial markets are unstable. The statement helped those who borrowed in yen to buy the Magnificent Seven and other AI stocks to stop selling and even add new carry trade positions.
- BOJ July 31 meeting minutes released overnight are hawkish. One member thought that at least 1% would be an appropriate neutral interest rate. For reference, the present rate is 0.25%.
- The Treasury auction was weak. The weak Treasury auction started a cascade of selling. As a member of The Arora Report, you already knew that the supply of U.S. Treasury bonds is so high that a big risk to the stock market is weak auctions. As a matter of fact, on Monday, when Treasury bonds rallied and everyone was buying bonds, The Arora Report gave a signal to take advantage of the strength to short the bond ETF TLT or buy inverse bond ETF TBT. That call has now proven spot on as the bonds were shorted right at the top. The trades are profitable. Here are the details from the Treasury auction:
- $42B 10-year Treasury note auction results
- High yield: 3.960% (When-Issued: 3.929%)
- Bid-to-cover: 2.32
- Indirect bid: 66.2%
- Direct bid: 16.0%
- There is a $25B auction of 30-year Treasury bonds today. If the auction results are weaker, expect another market drop. On the hand, the market may rally if auction results are better than expected.
- The stock market has now become ulta-focused on jobless claims as Wall Street is beginning to recognize that initial jobless claims is a leading indicator. Of course, as a member of The Arora Report, you already knew that jobless claims is a leading indicator that carries heavy weight in the adaptive ZYX Asset Allocation Model with inputs in ten categories. Here are the key points:
- Initial jobless claims came at 233K vs. 240K consensus.
- Stocks are being aggressively bought on this data on the assumption that this data indicates the jobs picture is not slowing as fast as feared.
- As a member of The Arora Report, you already know that aggressive buying on this data is highly flawed because this data is highly volatile. For a country as big as the U.S., 6,000 fewer jobless claims is hardly something to hang your hat on.
- As we have shared with you before, prudent investors should look at a four week moving average of initial jobless claims.
- Expect a high degree of volatility in stocks, bonds, gold, and oil. Expect bitcoin to continue to move at the mercy of bitcoin whales.
- 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. The protection band is one of the large number of unique edges that are available to members of The Arora Report.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), 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.
Note for new members: Smart money often sells into the strength generated by momo crowd buying and buys into the weakness generated by momo crowd selling. Over a long period of time, investors come out ahead by adopting smart money’s ways. The exception is in a raging bull market – for very short term trades, consider following the momo crowd and not smart money.
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
Bitcoin (BTC.USD) is seeing buying.
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 $2448, silver futures are at $27.06, and oil futures are at $75.54.
S&P 500 futures are trading at 5274 as of this writing. S&P 500 futures resistance levels are 5400, 5500, and 5622: support levels are 5256, 5210, and 5020.
DJIA futures are up 145 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.
A protection band of 0% would be very bullish and would indicate full investment with 0% in cash. A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.
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.
To take a free 30-day trial to paid services to gain access to more opportunities, please click here.
This post was just published on ZYX Buy Change Alert.
Markets can generate substantial wealth for knowledgeable investors. NOW YOU TOO CAN ALSO SPECTACULARLY SUCCEED AT MEETING YOUR GOALS WITH THE HELP OF THE ARORA REPORT. You are receiving less than 2% of the content from our paid services. …TO RECEIVE REMAINING 98% INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES, TAKE A FREE
TRIAL TO PAID SERVICES.
Please click here to take advantage of a FREE 30 day trial.
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.
