By Nigam Arora
To gain an edge, this is what you need to know today.
Positive Positioning
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 pulled back from recent highs to the top band of zone 1 (support).
- The chart shows that the stock market has rallied from the top band of zone 1, but it is still below recent highs.
- RSI on the chart shows that the stock market has room to go higher.
- A critical speech from Fed Chair Warsh is ahead at Jackson Hole at 10am ET.
- Right now there is a lot of speculation as to what Warsh will say. In The Arora Report analysis, here are the possibilities:
- Warsh may not say anything of consequence as Warsh is a believer in not letting the Fed guide the markets but instead let the market make up its own mind. However, Warsh is under tremendous pressure to outline a clear direction.
- Warsh could give lip service to being hawkish due to the data but not say anything about the future course of monetary policy.
- Warsh could actually say something substantive that matters.
- In The Arora Report analysis, Wall Street is positioned bullish ahead of Warsh’s speech. The narrative is that the stock market is going to go higher irrespective of what Warsh says. If Warsh is hawkish, this will in theory be negative for the stock market, but momo gurus will likely spread the narrative that Warsh does not mean it. If Warsh is dovish, momo gurus will likely be out in full force saying it is a signal to aggressively buy stocks.
- In The Arora Report analysis, irrespective of what Warsh says and how the market reacts, prudent investors need to remember that nothing is going to change the following:
- U.S. debt is $40T.
- The federal deficit continues to rise.
- Inflation is sticky so far.
- Hard data favors raising interest rates.
- The Fed is under tremendous political pressure to not raise interest rates prior to the midterm election.
- Neither political party has the courage to act responsibly to curb deficits.
- The sum total of the foregoing is that the stock market has more risk than generally believed.
- Prudent investors should continue to balance the upside from this next phase of AI with the rising risks from fiscal and monetary policies. Having deeper knowledge at this time will be a big asset to prudent investors. The easiest way to gain deeper knowledge is to listen to podcasts in Arora Ambassador Club. Click here to get on the waitlist to join.
- Much anticipated earnings from AI superstar Marvell (MRVL) were excellent. However, the whisper numbers were rising going into earnings. MRVL is falling because earnings were below whisper numbers. This illustrates the risk in the market of very high expectations that most investors are oblivious to.
- Remember that the media and Wall Street are structurally trapped to always be bullish – if they are not bullish, it hurts their revenues. For this reason, prudent investors should take what they hear from the media and from Wall Street with a grain of salt.
- University of Michigan consumer sentiment will be released at 10am ET, but for today, it is not going to matter because of Warsh’s speech.
- As an actionable item, the sum total of the foregoing is in the Arora Protection Band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the Arora Protection Band. The Arora Protection Band is one of the large number of unique edges that are available to members of The Arora Report.
Magnificent Seven Money Flows
Most portfolios are now heavily concentrated in the Mag 7 stocks. For this reason, to get ahead and get an edge, investors need to dig below the surface of the Mag 7 stocks. It is equally important to rise above the noise of daily news on the Mag 7 stocks. The best way to get an edge, dig below the surface, and rise above the noise of the daily news is to pay attention to early money flows in the Mag 7 stocks on a daily basis. When there is significant news in the Mag 7 stocks that rises above the threshold of noise and impacts your entire portfolio, it is covered in the main section above.
In the early trade, money flows are positive in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Apple (AAPL).
In the early trade, money flows are neutral in Nvidia (NVDA) and Tesla (TSLA).
In the early trade, money flows are neutral in S&P 500 ETF (SPY) and negative in 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. Smart money is an important indicator but is only one of hundreds of indicators that go into determining the Arora Protection Band and signals. Please click here and here to understand how signals are generated.
Very Very Short-Term Indicator
The Arora Report’s proprietary 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.
Gold
The momo crowd is *** in gold in the early trade. This is reflected in gold ETF (GLD), silver ETF (SLV), gold miner ETF (GDX), and silver miner ETF (SIL). Smart money is *** in the early trade.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is selling oil in the early trade. Smart money is inactive in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is range bound.
Markets
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.
S&P 500 futures are trading at 7749 as of this writing. S&P 500 futures resistance levels are 7831, 7900, and 8000 : support levels are 7700, 7318, and 7194.
DJIA futures are up 102 points.
Gold futures are at $4611, silver futures are at $71.34, and oil futures are at $82.62.
Arora Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror. The proprietary Arora Protection Band from The Arora Report is very popular. The Arora Protection Band puts all of the data, all of the indicators, all of the news, all of the crosscurrents, all of the models, and all of the analysis in an analytical framework that is easily actionable by investors.
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.
