By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Fed’s Favorite Inflation Gauge
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 the stock market is consolidating between the resistance zone and support zone.
- RSI on the chart shows that the stock market can go either way from here.
- This morning, the stock market dodged a big bullet. The bullet was the fear that PCE, the Fed’s favorite inflation gauge, would come higher than the consensus. The data came inline with the consensus. Here are the details:
- Headline PCE came at 0.3% vs. 0.3% consensus.
- Core PCE came at 0.3% vs. 0.3% consensus.
- The PCE data just released has proven that The Arora Report call has been spot on. The Arora Report call has been that inflation is coming from services and is sticky. Digging below the headline, the just released data shows that inflation is coming from services and is sticky.
- Momo gurus have been forecasting that inflation would have gone down to 2% by now. If you annualize 0.3%, it translates to 3.6%. The momo gurus are wrong again. Even though momo gurus are almost always wrong, prudent investors should not ignore them. The reason is that the media promotes momo gurus because they boost ratings. Momo gurus have legions of followers who do not do any analysis and just follow the momo gurus like sheep.
- The U.S. economy is 70% consumer based. Therefore, prudent investors pay attention to personal income and personal spending. Consumers continue to excessively spend. This is helping the economy and the stock market in the short term, but it is not sustainable in the long term. Here are the details of the data:
- Personal spending came at 0.8% vs. 0.6% consensus.
- Personal income came at 0.5% vs. 0.5% consensus.
- In the stock market, there is a sigh of relief that earnings from Microsoft (MSFT) and Alphabet (GOOG, GOOGL) were better than the consensus and whisper numbers.
- 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. There is a change in the protection band.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Apple (AAPL), Amazon (AMZN), GOOG, MSFT, and Nvidia (NVDA).
In the early trade, money flows are negative in Meta (META) and Tesla (TSLA).
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.
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 range bound.
Markets
Our very, very short-term early stock market indicator is ***. On the flip side, the market is experiencing a short squeeze in the early trade. That is the reason the indicator is positive. Remember, today is a Friday. On Fridays, short squeezes have a higher propensity to accelerate. 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 down, and bonds are ticking up.
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 $2359, silver futures are at $27.50, and oil futures are at $84.22.
S&P 500 futures are trading at 5119 as of this writing. S&P 500 futures resistance levels are 5210, 5256, and 5400: support levels are 5020, 4918, and 4852.
DJIA futures are up 11 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.
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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.
