By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Mother Of All Reports
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 has pulled back below the bottom band of the resistance zone.
- The chart shows that the stock market is still hanging above the mini support zone.
- RSI on the chart shows that the stock market is oversold. Oversold markets tend to bounce.
- The consensus in the stock market has been immaculate everything – the landing, the Fed, interest rates, earnings, adoption of AI, Russia, China, and the Middle East.
- The jobs report, also known as the mother of all reports, has gone against the market consensus of immaculate everything. The jobs picture is stronger than the consensus. In The Arora Report analysis, this means that the market consensus of six rate cuts in 2024 and seven total rate cuts is not correct. Here are the details:
- Non-farm private payrolls came at 164K vs. 132K consensus.
- Non-farm payrolls came at 216K vs. 162K consensus.
- Unemployment rate came at 3.7% vs. 3.8% consensus.
- Average hourly earnings came at 0.4% vs. 0.3% consensus.
- Average work week came at 34.3 vs. 34.4 consensus.
- After the release of the jobs report, stock futures initially fell but the momo crowd aggressively bought the dip.
- In 40 years, the stock market has not been down all first four days of a new year. Stock market bulls’ expectations are that due to oversold conditions, they will be able to run up the stock market. If stock market bulls do not succeed today, it will be a negative and may lead to changes in the protection band.
- Consider continuing to take profits on tactical positions by scaling out.
- 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.
Magnificent Seven Money Flows
Money flows were negative in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL) before the release of the jobs report, but they have turned positive after the release of the jobs report.
In the early trade, money flows are mixed 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 *** 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 range bound.
Markets
Our very, very short-term early stock market indicator is ***. Keep in mind that it is a Friday and short squeezes tend to occur on Fridays. 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 $2049, silver futures are at $23.29, and oil futures are at $73.43.
S&P 500 futures are trading at 4722 as of this writing. S&P 500 futures resistance levels are 4770, 4826, and 4852: support levels are 4600, 4460, and 4400.
DJIA futures are down 51 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.
