By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
King Dollar
Please click here for a chart of the U.S. Dollar Index Bullish Fund (UUP).
Note the following:
- The chart shows when The Arora Report’s Morning Capsule headline read “MOMO GURUS PREDICT DEMISE OF DOLLAR BULL RUN, CHINA DATA TEMPERS ENTHUSIASM FOR STOCKS.”
- Momo gurus were thrilled as the dollar had been falling going into July 17, 2023. In the morning of July 17, 2023, there was a unanimous chorus that the dollar was about to fall out of bed. We wrote:
The chorus of momo guru predictions that the dollar bull run has ended is picking up steam again.
- Momo gurus are always trying to drive the dollar lower. The reason is that momo gurus’ real job is to run up the stock market in the short term. We previously wrote:
S&P 500 companies derive significant revenue from overseas. When overseas profits are converted into dollars, the profits go up when the dollar is weaker. For this reason, a weak dollar helps the stock market go up in the short term.
- Momo gurus are not concerned about the long term. In sharp contrast, the mission of The Arora Report is to help members maximize the money they make over their lifetimes. We previously wrote:
In the long term, a weaker dollar is not good for the U.S. A strong currency is the hallmark of a strong country.
- The chart shows the power of Arora support zones and Arora calls.
- The chart shows that the Arora call coincides with the low in the dollar.
- The chart shows that the Arora support zone worked as intended.
- The trendline on the chart shows that the dollar has gone straight up since July 17.
- Prudent investors should note that the dollar has gone up during a period in which China and Russia put in the most intense, unprecedented efforts to drive the dollar lower.
- Russia and China are now fully aligned on the objective of China replacing the U.S. as the world’s number one superpower. China and Russia understand that a big part of the strength of the U.S. is the king dollar. The U.S. military is strong. The best way for China and Russia to dethrone the U.S. is to drive the dollar lower.
- Q2 GDP – Third Estimate came 2.1% vs. 2.1% consensus.
- Initial jobless claims came at 204K vs. 215K consensus. This is very strong data indicating that the jobs picture is staying strong. Initial jobless claims are 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.
- Stock futures were down earlier this morning, but the momo crowd bought aggressively ahead of the economic data, as is their pattern.
- Stock futures dipped when jobless claims came much better than expected. As of this writing, the momo crowd is aggressively buying the dip.
- There are two important earnings that have an impact on the entire stock market.
- The large semiconductor company Micron (MU) guided lower as companies are spending more money on AI chips and not on conventional memory chips. Micron is working on a high bandwidth memory chip for AI, but it will not be available until 2024. The stock is down 3.8% as of this writing. We have been sharing with you that a fortune is to be made in artificial intelligence, but it will take expertise.
- The large used car deal CarMax (KMX) reported that comparable store used unit sales fell 9% year-over-year. The stock is down 12.2% as of this writing in the premarket, even though this is one of the stocks that is supposed to benefit if the UAW strike prolongs.
- According to the St. Louis Federal Reserve, credit card delinquency rate in Q2 was 2.8%. For reference, compare it to 2.6% delinquency rate in the Q4 2019 just before the pandemic hit and 6.8% in Q2 2009 during the great financial crisis.
- In The Arora Report analysis, the foregoing credit card data is backward looking. Investors should focus on leading indicators. Consumers are charging more and getting closer to their credit card limits. This may lead to higher delinquencies in the future. This is an important piece of data since the U.S. economy is about 70% consumer based and the recession has been postponed, in part, due to excessive consumer spending.
- 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 Meta (META).
In the early trade, money flows are negative in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), 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
Gold has fallen below $1900 on strong dollar.
The momo crowd is *** gold in the early trade. Smart money is *** gold in the early trade.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is *** in oil in the early trade after the strong move up yesterday after the EIA data. Please see yesterday’s Afternoon Capsule for details. 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 ***. 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 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 $1890, silver futures are at $22.74, and oil futures are at $93.23.
S&P 500 futures are trading at 4307 as of this writing. S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4200, 4000, and 3950.
DJIA futures are down 17 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 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.
