By Nigam Arora
To gain an edge, this is what you need to know today.
Fed Decision Harder
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 is consolidating just below the magnet.
- The chart shows that even though the stock market continues to levitate, RSI is not overbought. This increases the probability of the stock market hitting the magnet and breaking above it.
- The jobs report is known as the mother of all reports due to its importance. The just released December jobs report has made the Fed’s decision harder. Here are the details:
- Non-farm payrolls came at 50K vs. 55K consensus.
- Non-farm private payrolls came at 37K vs. 50K consensus.
- Unemployment rate came at 4.4% vs. 4.5% consensus.
- Average work week came at 34.2 vs. 34.3 consensus.
- Average hourly earnings came at 0.3% vs. 0.3% consensus.
- In The Arora Report analysis, right now, the most important number to the Fed is the unemployment rate. The fact that the unemployment rate came below the consensus makes it harder for the Fed to cut interest rates in January. The stock market is expecting an interest rate cut.
- Meta (META) is making a huge commitment to nuclear power by signing three deals.
- Meta is signing 20 year deals to buy power from Perry, Davis-Besse, and Beaver Valley nuclear plants for more than 2600 MW of power. All three plants are owned by Vistra (VST). The plants were previously owned by FirstEnergy (FE).
- Meta will support Oklo (OKLO) to develop 1.2 GW of power capacity in Ohio and prepay for power as well as provide funding to advance the project.
- Meta will fund two reactors from TerraPower.
- President Trump is instructing Fannie Mae (FNMA) and Freddie Mac (FMCC) to buy $200B of mortgage bonds. President Trump is taking this action to spur home buying. In The Arora Report analysis, this will reduce the 30 year mortgage rate by about 0.25%, but it will slightly increase the yield on long Treasury bonds. This is positive for home builder ETF (ITB) and stocks of home builders such as KB Home (KBH), D.R. Horton (DHI), and Lennar (LEN). This is also a positive for mortgage companies such as Rocket (RKT).
- President Trump says oil majors will spend $100B to support U.S. goals in Venezuela.
- The Supreme Court may rule on tariffs today. The consensus is the Supreme Court will find a way to support President Trump. Prudent investors need to know that companies are already lining up to seek refunds of tariffs they have paid in case the Supreme Court rules against the tariffs. The Supreme Court decision may be market moving especially if the Supreme Court rules against the tariffs.
- University of Michigan consumer sentiment will be released at 10am ET and may be market moving.
- 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.
Housing Starts
Housing starts came worse than expected, but builders are optimistic as demonstrated by higher building permits. Here are the details:
- September housing starts came at 1.306M vs. 1.320M consensus.
- September building permits came at 1.415M vs. 1.340M consensus.
- October housing starts came at 1.246M vs. 1.340M consensus.
- October building permits came at 1.412M vs. 1.355M consensus.
China And Japan
China continues to put more pressure on Japan due to Japan’s support for Taiwan. China appears to be emboldened by U.S. action in Venezuela. In the latest move, China is restricting exports of rare earths to Japan.
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 Apple (AAPL), Nvidia (NVDA), Alphabet (GOOG), and Tesla (TSLA).
In the early trade, money flows are neutral in Amazon (AMZN) and Meta (META).
In the early trade, money flows are negative in Microsoft (MSFT).
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. 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 *** due to the pending Supreme Court decision. 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 *** 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 *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is seeing selling.
Markets
Interest rates and bonds are range bound.
The dollar is range bound.
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 6983 as of this writing. S&P 500 futures resistance levels are 7000 and 7200 : support levels are 6780, 6500, and 6256.
DJIA futures are up 142 points.
Gold futures are at $4488, silver futures are at $78.10, and oil futures are at $58.25.
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.
