WEEKLY STOCK MARKET DIGEST: FED’S FAVORITE INFLATION GAUGE HOTTER THAN EXPECTED – MOMO GURUS WRONG AGAIN

Twitter
LinkedIn
Facebook

By Nigam Arora & Dr. Natasha Arora

Weekly Digest from The Arora Report is popular among serious investors and money managers because they have found studying insights from the prior week gives them an edge over the coming weeks. Here is the day by day rundown from the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers of The Arora Report

Please scroll down for the section ‘Protection Bands and What To Do Now.’

 

FED’S FAVORITE INFLATION GAUGE HOTTER THAN EXPECTED – MOMO GURUS WRONG AGAIN

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 has now decisively fallen below the low band of the support/resistance zone.
  • Legions of investors who follow traditional technical analysis aggressively bought the recent breakout above the top band of the support/resistance zone. Such investors now have major losses and are aggressively selling.
  • More selling pressure is coming from momo crowd selling on hotter PCE.  The momo crowd was buying stocks aggressively on hope strategy going into PCE as many momo gurus were predicting cooler PCE.  Momo gurus have been proven wrong again.
  • Yesterday afternoon, buying was extremely strong as shown on this chart that accompanied the Afternoon Capsule.  For details, please read the Afternoon Capsule. Investors who were aggressively buying yesterday are now taking losses in the premarket.
  • PCE is the Fed’s favorite inflation gauge.
    • PCE came at 0.6% vs. 0.4% consensus.
    • Core PCE came at 0.6% vs. 0.4% consensus.
  • The U.S. economy is about 70% consumer based. For this reason, prudent investors pay attention to personal income and spending data.
    • Personal income came at 0.6% vs. 0.9% consensus.
    • Personal spending came at 1.8% vs. 1.3% consensus.
    • This data shows that consumer spending is accelerating while consumer income is dropping.  It does not take a genius to see that this is not a good pattern.  
  • One of the reasons investing is so complex is the enormous power of momo gurus.  As always, momo gurus will find a way to spin this negative data as a reason to buy stocks.  Let us see if the momo crowd follows the momo gurus as the day progresses.
  • Fed’s Mester says that the Fed funds rate needs to go above 5% and stay there for some time.
  • As an actionable item, pay attention to the protection band.  The protection band is a good balance between various cross currents.

Europe

Momo gurus have recently been declaring that there will not be any recession in Europe.  This is one of the reasons European stocks have run up.

Germany’s economy shrank 0.4% in the fourth quarter.  The data is counter to the prevailing wisdom.

Layoffs

Ericsson (ERIC), the big telecommunications equipment provider, is laying off 8,500 employees.  Layoffs are now spreading to traditional communications equipment suppliers.

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial) selling stocks in the early trade.  Smart money is 🔒 stocks 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 🔒 in the early trade.  Smart money is 🔒 in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin has fallen below $24,000, disappointing bulls who have been predicting a run to $30,000.

Markets

Our 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.

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 $1820, silver futures are at $20.95, and oil futures are at $75.56.

S&P 500 futures are trading at 3968  as of this writing.  S&P 500 futures resistance levels are 4000, 4200, and 4318: support levels are 3950, 3860, and 3770.

DJIA futures are down 365 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 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.

See also  PAY ATTENTION: A MAJOR RISK EVENT IS AHEAD – NVIDIA EARNINGS

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.

 

BUYING IN STOCK MARKET ON ARTIFICIAL INTELLIGENCE INFLECTION MEETS SELLING ON ECONOMIC DATA

To gain an edge, this is what you need to know today.

Artificial Intelligence Inflection

Please click here for a chart of  Nvidia stock (NVDA).

Note the following:

  • The Morning Capsule is about the big picture and not an individual stock. The chart of NVDA is being used to illustrate the macro picture.
  • NVDA is the most important artificial intelligence stock.
  • NVDA stock has the fourth largest weight in the Nasdaq 100.
  • The chart shows that not long ago NVDA was in the Arora Buy Zone.
  • NVDA is in the ZYX Buy Model Portfolio.
  • The chart shows the very strong up move in NVDA stock from the buy zone.
  • The chart shows a strong move up in NVDA stock when earnings were released after the market closed yesterday.
    • NVDA reported earnings of $0.88 vs. $0.81 consensus.
    • NVDA reported revenue of $6.05B vs. $6.01B consensus.
    • NVDA is projecting Q1 revenue of $6.5B ± 2% vs. $6.3B consensus.
  • The most important takeaway from the NVDA conference call and earnings is that an inflection point has been reached in artificial intelligence.
  • CEO of NVDA, Jensen Huang said, “AI is at an inflection point, setting up for broad adoption reaching into every industry…From startups to major enterprises, we are seeing accelerated interest in the versatility and capabilities of generative AI. We are set to help customers take advantage of breakthroughs in generative AI and large language models. Our new AI supercomputer, with H100 and its Transformer Engine and Quantum-2 networking fabric, is in full production. Gaming is recovering from the post-pandemic downturn, with gamers enthusiastically embracing the new Ada architecture GPUs with AI neural rendering,”
  • NVDA said, “Customers will be able to engage each layer of NVIDIA AI – the AI supercomputer, acceleration libraries software or pretrained generative AI models – as a cloud service. Using their browser, they will be able to engage an NVIDIA DGX(TM) AI supercomputer through the NVIDIA DGX Cloud, which is already offered on Oracle Cloud Infrastructure, with Microsoft Azure, Google Cloud Platform and others expected soon. At the AI platform software layer, they will be able to access NVIDIA AI Enterprise for training and deploying large language models or other AI workloads. And at the AI-model-as-a-service layer, NVIDIA will offer its NeMo and BioNeMo customizable AI models to enterprise customers who want to build proprietary generative AI models and services for their businesses. Further details will be shared at the company’s GTC developer conference, taking place virtually March 20-23.”
  • The golden age of artificial intelligence is upon us.  Over the next several years, prudent investors will make a fortune from artificial intelligence while many in the momo crowd will lose their shirts. For investors wanting next-level knowledge, listen to the podcasts “ChatGPT: Potentially The Most Important Breakthrough Since The iPhone” and “Full Frontal Assault: ChatGPT Vs. Bard.”
  • Buying on excitement over artificial intelligence is meeting selling on strong economic data.
    • Q4 GDP Deflator – Second Estimate came at 3.9% vs. 3.5% consensus.
    • Q4 GDP Second Estimate came at 2.7% vs. 2.9% consensus.
    • Initial jobless claims came at 192K vs. 200K consensus.
  • Atlanta Fed President Bostic will speak at 10:50am ET.  San Francisco Fed’s Daly will speak at 2pm ET. Both can potentially move the markets.
  • As an actionable item to navigate both the bullish and bearish cross currents, pay attention to the protection band.

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 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 range bound.

Markets

Our 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.

Interest rates are ticking up, and bonds are ticking down.

The dollar is mixed.

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 $1830, silver futures are at $21.55, and oil futures are at $74.90.

S&P 500 futures are trading at 4017  as of this writing.  S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are up 93 points.

 

To gain an edge, this is what you need to know today.

Fed Minutes

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 moved below the low band of the support/resistance zone.
  • We have previously shared with you that traditional technical analysis no longer works as well as it used to – this is on full display on the chart.  This is the reason that The Arora Report has developed new proprietary technical indicators.
  • As previously stated, legions of investors who follow traditional technical analysis aggressively bought stocks only a few days ago when the stock market went above the top band of the support/resistance zone shown on the chart.  The same investors were taking losses and selling yesterday when traditional technical analysis gave a sell signal as the stock market fell below the low band of the support/resistance zone.  Such selling was, in part, responsible for the large down move yesterday.
  • Fed minutes will be released at 2pm ET.  Expect the minutes to be market moving.
  • Bullard and Mester wanted a 50 basis point interest rate increase at the last meeting, as previously stated in the Capsules.  The Fed raised interest rates by 25 basis points.  We will be carefully studying Fed minutes to see if there was support for 50 basis points beyond Bullard and Mester in the last meeting.
  • We will also be studying the Fed minutes to see the thinking of the Fed members about the terminal rate.
  • We previously shared with you and also discussed in podcasts, the importance of the terminal rate for stock market investors.
  • Keep in mind that there has been very strong economic data since the last Fed meeting.  This data includes the following:
    • A strong jobs report
    • Strong retail sales
    • Hotter CPI
    • Hotter PPI
  • More inflation data is ahead.  PCE, the Fed’s favorite inflation gauge will be released on Friday at 8:30am ET. 
  • As is their pattern, the momo crowd is buying stocks on hope strategy ahead of the Fed minutes. They are hoping that Fed minutes will be bullish for the stock market.

China

China is taking a major step to reduce U.S. influence on the world’s economy.  China is ordering state owned companies to stop using the big four accounting firms.  The stated purpose is to reduce  the U.S.’s influence on world affairs.

There is speculation that Chinese President Xi will soon visit Moscow to strengthen the alliance between China and Russia to counter the U.S.

Dividend Cut

Intel (INTC) is cutting its dividend by 66%.

A large number of investors who blindly focused on dividend strategies have been burned because their capital losses are more than the dividends they will get over 10 years.  Prudent investors need to be extra careful to stay away from heavily promoted dividend strategies. Often the stocks and ETFs selected in these strategies are based on the dividend but not on protection and growth of the principle.

Layoffs

McKinsey, the big consulting company, is laying off 2,000 employees.

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 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 🔒 in the early trade.  Smart money is 🔒 in the early trade.

For longer-term, please see oil ratings.

Bitcoin

The prestigious Bank for International Settlements has released a study that during the 2022 crash, whales did well by selling their coins right before big declines to mom and pop.  At the same time whales were selling large amounts of coins, they were manipulating the price of bitcoin and using the media to persuade mom and pop to buy bitcoin.

This is a revelation to many.  Of course, this is old news to the regular readers of the Morning Capsule.  We have been sharing this information with you in real time and not months after the fact.  This is an example of the edges investors get with The Arora Report.

Bitcoin is levitating above $24,000.

Markets

Our 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.

Interest rates are ticking down, and bonds are ticking up.

The dollar is range bound.

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 $1847, silver futures are at $21.87, and oil futures are at $75.94.

S&P 500 futures are trading at 4012  as of this writing.  S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are up 46 points.

 

RUSSIA SUSPENDS NUCLEAR TREATY, WALMART AND HOME DEPOT CAUTIOUS

To gain an edge, this is what you need to know today.

Caution On Consumer

Please click here for a chart of Walmart (WMT) stock.

Note the following:

  • The Morning Capsule is about the big picture and not an individual stock. The chart of Walmart stock is being used to illustrate a bigger point.
  • We have been sharing with you The Arora Report analysis that Wall Street’s earnings estimates were too high.  So far, that call has proven spot on.  Now in their guidance, Walmart and Home Depot (HD) are showing that The Arora Report analysis has been right.
  • The stock market has been running up in part on the assumption that the consumer is strong. Prudent investors have been waiting on confirmation from earnings of retailers.  This morning two of the biggest retailers, Walmart and Home Depot, reported earnings.
  • Earnings projections from both Walmart and Home Depot are weak, proving momo gurus wrong once again.
  • Walmart easily beat the earnings estimates.
    • Earnings came at $1.71 vs. $1.52 consensus.
    • Revenues came at $164B vs. $159.7B consensus.
    • Same store sales, open for more than a year jumped 8.3% vs. 4.9% consensus.
  • The great earnings from Walmart is the road behind.  Prudent investors need to focus on the road ahead.  Here is the road ahead as Walmart sees it.
    • For fiscal 2024, Walmart sees earnings in the range of $5.90 – $6.05 vs. $6.53 consensus.
    • For the first quarter, Walmart sees earnings in the range of $1.25 – $1.30.
    • Walmart is projecting sales growth of 2.5% – 3% vs. 3% consensus.
    • Walmart is cautious on the consumer going forward.
  • The chart shows that Walmart stock had been rallying along with the market going into earnings.
  • The chart shows that in early trade in the premarket Walmart stock has given up all of its recent gains.
  • The chart shows that Walmart stock is now trading around the top band of the support zone.
  • As of this writing, the momo crowd is aggressively buying the dip in Walmart stock.
  • Home Depot beat earnings estimates but missed the revenue estimate.  The guidance is cautious.
    • Home Depot earnings came at $3.30 vs. $3.28 consensus.
    • Revenues came at $35.8B vs. $36B consensus.
    • Customer transactions fell by 6%.
    • Comparable store sales fell by 0.3% vs. a consensus of an increase of 0.3%.
    • Home Depot is guiding earnings to decline by mid-single digit percentage in fiscal 2023 vs. an estimate of flat earnings.
See also  HOTTER PRODUCER PRICE INDEX, THE POWER OF ‘PICKS AND SHOVELS’ PLAY

Russia Suspends Nuclear Treaty

Russia is suspending its participation in the New START treaty.  This is the last remaining nuclear treaty between Russia and the U.S.

In his state-of-the-nation address, Putin is talking tough.

Biden made a surprise visit to Ukraine and is visiting Poland.

The stock market has come to completely ignore Ukraine and Russia risks.  Prudent investors should not forget Ukraine and Russia risks when deciding their protection band.  

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 stocks in the early trade.  Smart money is 🔒 stocks 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

There is some disappointment among bitcoin bulls that whales did not run bitcoin substantially above $25,000 in low liquidity conditions over the weekend. Bitcoin is trading at $24,555 as of this writing.

Markets

Our 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.

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 $1845, silver futures are at $21.83, and oil futures are at $76.79.

S&P 500 futures are trading at 4051  as of this writing.  S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are down 331 points.

 

To take a free 30-day trial to paid services to gain access to more opportunities, please click here.

Markets can generate substantial wealth for knowledgeable investors. NOW YOU TOO CAN ALSO SPECTACULARLY SUCCEED AT MEETING YOUR GOALS WITH THE HELP OF THE ARORA REPORT. You are receiving less than 2% of the content from our paid services. …TO RECEIVE REMAINING 98% INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES,
TAKE A FREE TRIAL TO PAID SERVICES.

Please click here to take advantage of a FREE 30 day trial.

Nigam Arora

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

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.

Subscribe to 'Generate Wealth'

Free Forever

More To Explore

30 Day Free Trial

Cancel within 30 days and you owe nothing

When you take a FREE 30 day trial, you get access to powerful techniques used by billionaires and hedge funds to grow richer. You can continue to use these powerful techniques to grow richer even if you cancel your subscription. You come out ahead by subscribing no matter how you look at it.

A fortune is to be made from AI stocks.
Get the list of 18 AI stocks to grab your share of the profits — no cost to you.

A fortune is to be made from AI stocks.

Get the list of 18 AI stocks to grab your share of the profits.

AI is a $1 Trillion Market

Making A Fortune
In Artificial Intelligence

Golden Age of Artificial Intelligence