By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Hot Inflation Data
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 hit a new high yesterday.
- The chart shows the stock market drop after the release of the Producer Price Index (PPI).
- The chart shows the stock market is comfortably above zone 1 (support).
- RSI on the chart shows the stock market is overbought.
- Treasury Secretary Bessent says interest rates should be 150 – 175 bps lower. That would bring the effective Fed funds rate to about 2.6%. Interest rates have never been that low over the last 70 years when inflation was at current levels of about 3% or higher.
- All eyes are on Jackson Hole, where Fed Chair Powell will be speaking. Powell’s speech is scheduled for August 22 at 10am ET. Here is the question for prudent investors: Will Powell push back against Bessent’s call for 150 – 175 bps cuts. Expect Powell’s speech to be market moving.
- The just released PPI data shows inflation at the producer level much hotter than expected. Here are the details:
- Headline PPI came at 0.9% vs. 0.2% consensus.
- Core PPI came at 0.9% vs. 0.2% consensus.
- In The Arora Report analysis, PPI data is a gut punch to momo crowd investors who have decided that data does not matter.
- Further in The Arora Report analysis, the increase in PPI is due to tariffs and will likely filter to the Consumer Price Index (CPI) in the coming months. PPI data runs counter to what President Trump has been promoting and the prevailing wisdom in the stock market that tariffs do not cause price increases. On the other hand, there is merit to the argument that price increases from tariffs are a one time event.
- Expect momo gurus to not give up easily and come up with a narrative that concludes PPI does not matter.
- The momo crowd will follow momo gurus. Here is the real question: What will smart money do?
- Initial jobless claims came at 224K vs. 228K.
- President Trump is scheduled to speak at 1pm ET. Trump’s speech 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.
Europe
Money continues to flow into stocks in Europe.
Eurozone Q2 GDP came at 0.1% quarter-over-quarter vs. 0.1% consensus.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN).
In the early trade, money flows are neutral in Microsoft (MSFT).
In the early trade, money flows are negative in Nvidia (NVDA), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).
In the early trade, money flows are negative 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
Opposing forces are at work in gold. On one hand, gold benefits from inflation. On the other hand, high PPI means the Fed should be reluctant to cut interest rates and that is not good for gold.
The momo crowd is *** in 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. Hot PPI data is a negative for bitcoin.
Markets
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.
S&P 500 futures are trading at 6463 as of this writing. S&P 500 futures resistance levels are 6500 and 6700 : support levels are 6256, 6131, and 6017.
DJIA futures are down 160 points.
Gold futures are at $3399, silver futures are at $38.28, and oil futures are at $62.99.
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.
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.
