By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Wait For PPI and CPI
Please click here for a chart of oil ETF USO.
Note the following:
- Prudent investors are waiting for Producer Price Index (PPI) and Consumer Price Index (CPI) data as well as earnings.
- PPI will be released on October 12.
- CPI will be released on October 13.
- Bank earnings this week include JPM, C, and WFC.
- TSM is the largest contract semiconductor manufacturer in the world. Its earnings this week will provide significant insights.
- In The Arora Report analysis, Wall Street’s earnings estimates are still too high.
- Wall Street is expecting inflation to have peaked and CPI as well as PPI to come in lower than the consensus numbers. If PPI and CPI are lower than the consensus, the momo crowd can easily run up the stock market 5% – 10%.
- In following their pattern, the momo crowd is again buying stocks leading up to the CPI and PPI release based on hope strategy. Stock futures were lower by over 0.5% in the early morning, but now they have turned positive as of this writing on momo buying.
- Smart money is inactive because smart money tends to be cautious ahead of such events, as they pose risks.
- The chart shows that there is a flaw in Wall Street’s analysis.
- Gasoline prices are a big part of inflation.
- Gasoline prices lag oil prices.
- The chart shows that oil prices were falling in September, but they are beginning to rise in October.
- Even if the momo crowd rallies the stock market because of lower inflation numbers, the chart of oil shows that oil prices are going up in October. Gasoline prices should follow. This means that inflation numbers for October and November may go higher. For this reason, any rally in the stock market may be short lived unless there is other news, such as the Fed backing off.
- One cross current to remember is that November and December tend to be seasonally strong months.
- Historically, the market also tends to run up after the midterm election.
- The chart shows that oil is breaking out from the downtrending trendline.
- The chart shows when the Arora Buy signal was given to buy USO. The trade has already hit the first target zone.
- The chart shows that RSI is overbought. For this reason, there may be a slight pullback in oil. But based on OPEC+ production cuts, oil should go higher unless there is other news.
Chinese Semiconductor Stocks Decimated
Chinese semiconductor stocks are getting decimated. The U.S. has restricted the sale to China of semiconductors that use U.S. technology. Companies wanting to use U.S. semiconductor technology in Chinese chips must get an export license.
This resulted in $8.6B in market value loss in Chinese chip makers.
Bank Of England
Bank of England (BOE) continues to fight one hand with the other. With one hand, BOE increased its support for the bond market. With the other hand, BOE officials say interest rate hikes will continue because inflation must be tamed.
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 is below the psychological resistance of $20,000.
Markets
Our very, very short-term early stock market indicator is 🔒, but expect the market to open 🔒 on momo 🔒. 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 $16.83, silver futures are at $19.81, and oil futures are at $92.61.
S&P 500 futures resistance levels are 3770, 3860 and 3950: support levels are 3630, 3600 and 3520.
DJIA futures are up 112 points.
Protection Bands And What To Do Now?
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold 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.
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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.
