By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
The Fed’s Problem
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows that the stock market has had a significant rally since the beginning of November.
- The chart shows Arora buy signals.
- The chart shows that the stock market is consolidating right at the low band of the resistance zone.
- RSI shows that the stock market can go either way but the probability to the upside is higher.
- CPI data will be released tomorrow at 8:30am ET, and PPI will be released on Wednesday at 8:30am ET. Both have the potential to move the stock market, but the market will really be waiting for the Fed.
- The FOMC meeting starts tomorrow. The FOMC rate decision will be announced Wednesday at 2pm ET followed by Powell’s press conference at 2:30pm.
- The Fed has a problem. In The Arora Report analysis, the rise in the stock market has considerably loosened financial conditions. Financial conditions have become significantly looser than the Fed likely wants at this time.
- In The Arora Report analysis, the Fed needs to be very careful as the stock market is positioned to twist whatever the Fed and Powell say to move the runaway stock market train faster. Here is the key question for investors: Will the Fed be able to put the breaks on the runaway stock market train?
- The primary driver behind the runup in the stock market is a group of three market mechanics. Historically, market rallies driven by these market mechanics at this time of the year take a pause or even have a slight pullback right about now, before another leg up. The tentative plan is to use any pullback to buy. The more you understand about market mechanics, the more money you will extract from the markets. To help you, a new podcast titled “Market Mechanics Trump Mother Of All Reports – A Look Ahead” is in production. The podcast will be in Arora Ambassador Club.
- Two other factors driving the stock market higher are the following:
- AI frenzy
- Consensus of five rate cuts in 2024
- 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.
Deflation In China
China is now experiencing deflation.
- November CPI came at -0.5% month-over-month vs. -0.1% consensus.
- November PPI came at -3.0% year-over-year vs. -2.8% consensus.
In The Arora report analysis, since the U.S. is a huge importer of Chinese goods, deflation in China is helping inflation in the U.S. come down.
Stocks in China first fell and then came back on hopes of government stimulus.
Japan
The yen fell on an attempt to walk back earlier comments about raising rates.
In the Japanese stock market, Nikkei rose 1.5%.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Nvidia (NVDA) and Tesla (TSLA).
In the early trade, money flows are negative in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), 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
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
The momo crowd is *** oil in the early trade. Smart money is *** oil in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) dropped on disappointment that whales did not take advantage of low liquidity during the weekend to run up bitcoin. Bitcoin bulls were hoping for a run to $50,000. Instead, it appears that Whales took profits and sold Bitcoin to retail investors around $45,000, while building a narrative of Bitcoin going higher. Bitcoin is trading at $41,949 as of this writing in the premarket.
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 $2008, silver futures are at $23.20, and oil futures are at $71.27.
S&P 500 futures are trading at 4657 as of this writing. S&P 500 futures resistance levels are 4713, 4770, and 4826: support levels are 4600, 4460, and 4400.
DJIA futures are down 8 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.
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.
