By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Shocking 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 SPY touched the top band of the support zone.
- The chart shows that SPY is bouncing upwards from the top band of the support zone on the jobs report.
- RSI on the chart shows that the stock market has relieved the overbought condition and is now able to go higher if the market likes the results of the election.
- The headline of the jobs report is a shocker. Here are the details of the jobs report:
- Nonfarm payrolls came at 12K vs. 120K consensus.
- Nonfarm private payrolls came at -28K vs. 105K consensus.
- Average hourly earnings came at 0.4% vs. 0.3% consensus.
- Average work week came at 34.3 hours vs. 34.2 hours consensus.
- Unemployment rate came at 4.1% vs. 4.1% consensus.
- In The Arora Report analysis, the low number of jobs is primarily due to hurricanes. Strikes also had a small impact. The Bureau of Labor Statistics is not quantifying the impact of hurricanes and strikes.
- In The Arora Report analysis, real nonfarm private payrolls after adjustments are likely in the range of 130K – 160K instead of the -28K reported.
- In the early trade, there is buying in bonds on the jobs report headline. The yield on 10 year Treasuries has dropped from 4.31% before the jobs report to 4.23% as of this writing.
- The stock market is seeing buying on falling yields. Prudent investors need to note the bullish tendencies of this market – when yields fall, stocks rise. However, when yields rise, stocks do not fall. This is an indication of very positive sentiment.
- The weak headline may give the Fed an excuse to cut interest rates next week.
- Today is the first day of the month. Wall Street street is front running the blind money that pours into Wall Street on the first two days of the month. Blind money is the money that is invested without any analysis and irrespective of market conditions.
- This has been the busiest week for earnings. Among important new earnings, oil giants Chevron (CVX) and Exxon (XOM) are reporting earnings better than the consensus and whisper numbers. Amazon (AMZN) reported earnings significantly better than the consensus and whisper numbers. Apple (AAPL) reported earnings inline with consensus but slightly weaker than whisper numbers. Intel (INTC) reported earnings better than the consensus and whisper numbers.
- Overall, earnings reported so far are slightly weaker than expectations. This indicates high risk in this market because the stock market is priced for perfection.
- 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.
U.K.
The 10 year gilt yield has spiked by 25 bps in a few days to 4.5%. U.K. bonds are experiencing their worst week in a year.
The rise in yields in the U.K. is a result of the borrowing and spending plans of the new government. In The Arora Report analysis, here is a lesson for U.S. investors as both Harris and Trump are planning to recklessly borrow and spend.
Magnificent Seven Money Flows
In the early trade, money flows are positive in AMZN, Nvidia (NVDA), Microsoft (MSFT), Meta (META), and Tesla (TSLA).
In the early trade, money flows are neutral in Alphabet (GOOG).
In the early trade, money flows are negative in AAPL.
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.
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.
Very Very Short-Term Indicator
Our very, very short-term early stock market indicator is ***. Remember today is a Friday. Short squeezes often occur 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.
Gold
Gold saw profit taking yesterday ahead of the jobs report. However, there is buying in gold in the early trade today on the weak headline jobs report number.
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
There are rumors that Iran is planning to attack Israel from Iraqi territory. As a result, oil is rising.
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 range bound.
Markets
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.
S&P 500 futures are trading at 5765 as of this writing. S&P 500 futures resistance levels are 5926 and 6017: support levels are 5748, 5622, and 5500.
DJIA futures are up 167 points.
Gold futures are at $2765, silver futures are at $33.02, and oil futures are at $71.03.
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, Treasury bills, short term fixed income, 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.
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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.
