By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Hot Jobs Report
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 the stock market has broken below the upward sloping trendline.
- The chart shows that was a perfect setup for the stock market to drop yesterday when Israel went on high alert due to the prospect of Iranian retaliation. As a member of The Arora Report you already knew in advance that retaliation was coming.
- As is their pattern, the momo crowd was buying stocks this morning ahead of the mother of all numbers, the jobs report, on hope strategy.
- Jobs report came much hotter than expected. Here are the details:
- Non-farm payrolls came at 303K vs 200K consensus. This indicates that the economy is strong and a large number of new jobs are being created. The vast majority of these jobs are at the low end such as in hospitality. Jobs remain weak in information technology as more workers are replaced by AI.
- Nonfarm private payrolls came at 232K vs 160K consensus. This indicates that there is no need to cut interest rates at this time.
- Unemployment rate came at 3.8% vs 3.8% consensus. The unemployment rate remains low.
- Average hourly earnings came at 0.3% vs 0.3% consensus. This indicates that reducing inflation from here will be difficult.
- Average work week came at 34.4 vs 34.3 consensus.
- The stock market briefly lost the gains but the momo crowd aggressively bought the dip.
- In The Arora Report analysis, the hot jobs report is reducing the probability of rate cuts starting in June. Keep in mind that momo gurus claim to know for sure that rate cuts will start in June. You may remember that the same momo gurus knew for sure that there would be six rate cuts this year starting in March. Clearly, momo gurus have been wrong. However, prudent investors need to understand that momo gurus are often wrong because they are not driven by objective analysis. Their job is to persuade investors to buy stocks in the disguise of analysis. To fulfill their job, they must be permabulls. Consider not listening to permabulls or permabears.
- Prudent investors should start with Arora’s Second Law of Investing and Trading: “Nobody knows with certainty what is going to happen next in the markets.” Follow with Arora’s Third Law, which states, “Making investing and trading decisions based on probabilities is the only realistic and profitable approach.”
- In The Arora Report analysis, the probability of a rate cut in June is now down to about 50% based on the data so far. However, investors need to keep two facts in mind:
- There is plenty of data between now and June that can change the course.
- Powell is clearly itching to cut rates. It is not clear what Powell’s motivation is. Some conservative analysts believe that Powell wants to cut rates to help Biden get reelected. Trump has stated that he will not reappoint Powell.
- 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.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Apple (AAPL), Amazon (AMZN), Meta (META), Nvidia (NVDA), and Microsoft (MSFT).
In the early trade, money flows are negative in Alphabet (GOOG) and Tesla (TSLA).
In the early trade, money flows are positive 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 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 the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is range bound.
Markets
Our very, very short-term early stock market indicator is ***. Keep in mind two opposing crosscurrents today. Many investors will be selling to reduce risk ahead of potential escalation in the Middle East over the weekend. On the flip side, today is Friday and short squeezes tend to take place on Fridays. 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 $2308, silver futures are at $26.77, and oil futures are at $86.61.
S&P 500 futures are trading at 5221 as of this writing. S&P 500 futures resistance levels are 5256, 5400, and 5500 : support levels are 5210, 5020, and 4918.
DJIA futures are up 44 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.
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 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.
