By Nigam Arora
To gain an edge, this is what you need to know today.
25 Or 50 BPS Rate Cut
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 of SPY is a monthly chart to give you a long term picture.
- The chart shows when the stock market broke out in June.
- The chart shows September is on track to be the fifth consecutive positive month.
- The chart shows the stock market is above the trendline.
- RSI on the chart shows the stock market is not overbought even given the gains since June.
- Important inflation data is ahead. Producer Price Index (PPI) will be released on Wednesday at 8:30am ET. Consumer Price Index (CPI) will be released on Thursday at 8:30am ET.
- We previously shared with you The Arora Report call that the probability of a rate cut in September is 99%.
- The inflation data this week will determine if the rate cut is 25 bps or 50 bps.
- Understanding positioning gives investors an edge. Positioning is an important Wall Street mechanic. To learn about the nuances of positioning that Wall Street keeps close to the chest due to its high value, listen to the podcast in Arora Ambassador Club titled “MARKET MECHANICS: POSITIONING.”
- In The Arora Report analysis, Wall Street is positioned for “bad news is good news.” Even if there is bad news in the upcoming inflation data this week, Wall Street believes it will be a positive for the stock market because the release of the inflation data will lift the overhang.
- What if the inflation data is much worse than expected? Momo gurus already have an answer to run up the stock market – any increase in inflation will be temporary because the impact of tariffs will disappear in the next two or three quarters.
- 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.
Japan
Stocks in Japan jumped on the resignation of Prime Minister Ishiba. The reason is that the overhang from the defeat of the ruling party in the recent elections has lifted. Stocks in Asia are jumping on positive sentiment from Japan. The positive sentiment from Japan is being carried to the U.S.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Tesla (TSLA).
In the early trade, money flows are neutral in Apple (AAPL).
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 ***. 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
OPEC+ has decided to implement a production adjustment of 137K barrels per day from 1.65M barrels per day announced in April 2023. Oil is jumping on the news.
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
Interest rates are ticking down, and bonds are ticking up.
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.
S&P 500 futures are trading at 6504 as of this writing. S&P 500 futures resistance levels are 6700 and 7000 : support levels are 6500, 6256, and 6131.
DJIA futures are up 80 points.
Gold futures are at $3660, silver futures are at $41.87, and oil futures are at $63.13.
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.
