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

Hotter PPI

Please click here for a chart of China ETF ASHR.

Note the following:

• The Arora Report has been warning you for a while that the worsening relationship between the U.S. and China is a risk that long term, prudent investors need to take into account.
• Biden has soured the stock market sentiment by calling the Chinese economy a “ticking time bomb.”  Biden also called the Communist Party’s leaders “bad folks.”
• Biden also jabbed China’s President Xi by calling his signature Belt and Road Initiative the “debt and noose.”
• The chart shows that unlike in the U.S., the AI rally in China did not sustain itself.  Chinese companies are spending as heavily on AI as U.S. companies, but the AI frenzy has not taken hold among investors in China as it has among investors in the U.S.
• The chart shows the downward sloping trendlines in the Chinese stock market.  In contrast, there are upward sloping trendlines in the U.S. stock market.
• Producer Price Index (PPI) came hotter than expected.  Here are the details:
  • Headline PPI came at 0.3% vs. 0.2% consensus.
  • Core PPI came at 0.3% vs. 0.2% consensus.
• There were whisper numbers that core PPI would come below the consensus due to lower PPI in China.  American producers are highly dependent on Chinese imports.
• In The Arora Report analysis, the rise in PPI runs counter to momo gurus’ bullish narrative that inflation is over and done with and the Fed is going to cut interest rates.  
• Please click here for a chart of yesterday’s stock market price action.  The price action shown on the chart is negative from a technical perspective.  There is concern that the stock market in the U.S. ran up yesterday morning after the release of CPI but smart money sold into the strength generated by momo buying, causing a reversal.  The sell off was aided by the poor Treasury auction.  Please read the Afternoon Capsule for details.
• Investors may consider watching 7-10 year Treasury ETF IEF and long bond Treasury ETF TLT.
• 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

In the early trade, money flows are negative in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).

In the early trade, money flows are negative in S&P 500 ETF SPY and mixed in 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 🔒 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

Bitcoin (BTC.USD) 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 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 $1947, silver futures are at $22.73, and oil futures are at $83.28.

S&P 500 futures are trading at 4471 as of this writing.  S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.

DJIA futures are down 55 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 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.

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

Shelter Is Problematic

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 pulled back from the mini resistance zone on signs that AI frenzy fever is breaking.
• The chart shows that there is buying in the stock market in the early trade.
• Yesterday the stock market dropped.  The initial trigger was earnings from AI super computer maker Super Micro Computer (SMCI).  Investors bitten by the AI bug were aggressively buying SMCI going into earnings.  Earnings showed that SMCI was not selling as many AI servers as investors had hoped for.  This caused a sell off in the AI favorite stock Nvidia (NVDA) in spite of Nvidia introducing new products the day before.  Sell off in Nvidia dragged the market down.
  • As a full disclosure, a signal was given in ZYX Short to short sell SMCI near the top.  The position was quickly closed out at a nice profit as SMCI stock fell.
• As is their pattern, the momo crowd started buying stock futures yesterday after the close of the regular session.  The momo crowd is using hope strategy, and the hope was that CPI would be benign.  Buying by the momo crowd in stock futures fed on itself, leading to aggressive buying going into the release of CPI.
• RSI on the chart shows that in the short term the market is close to oversold.
• The mini resistance zone on the chart is a magnet for stocks to run to.
• CPI came mostly in line with expectations.  Here are the details of the CPI data:
  • Headline CPI came at 0.2% month-over-month vs. 0.2% consensus.
  • Headline CPI came at 3.2% year-over-year vs. 3.3% consensus.
  • Core CPI came at 0.2% month-over-month vs. 0.2% consensus.
  • Core CPI came at 4.7% year-over-year vs. 4.8% consensus.
• Especially noteworthy is that shelter accounted for 90% of the rise in inflation.
• Also noteworthy is that this is the lowest back to back increase in inflation in two years.
• We have been sharing with you the data about producer price deflation in China.  Since the U.S. is a big importer of Chinese goods, deflation in China is helping the U.S.
• Weekly initial jobless claims came at 248K vs. 230K consensus.  This indicates that labor demand is beginning to decline. Jobless claims is a leading indicator and carries heavy weight in our adaptive ZYX Asset Allocation Model with inputs in ten categories.  In plain English, adaptiveness means that the model changes itself with market conditions.  Please click here to see how this is achieved.  One of the reasons behind The Arora Report’s unrivaled performance in both bull and bear markets is the adaptiveness of the model.  Most models on Wall Street are static.  They work for a while and then stop working when market conditions change.
• In The Arora Report analysis, the probability of a Fed rate hike in September has now fallen to less than 10%.
• 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 in Nvidia are negative in the early trade.

Money flows are positive in the early trade in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and 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 🔒 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 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.

Gold futures are at $1956, silver futures are at $22.82, and oil futures are at $83.67.

S&P 500 futures are trading at 4513 as of this writing.  S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.

DJIA futures are up 199 points.

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

Consumer Price Index Ahead

Please click here for a chart of Apple stock (AAPL).

Note the following:

• The Morning Capsule is about the big picture, not an individual stock.  The chart of AAPL stock is being used to illustrate the point.
• The chart shows AAPL stock bounced from the top band of the support zone.  The Arora Report has an unrivaled record of providing support zones, resistance zones, buy zones, and target zones over a long period of time.
• We previously wrote:

Apple stock is the largest stock in the market, has heavy weight in indexes, and is the most beloved stock perceived by many as a safe stock.  For this reason, whatever happens to Apple stock has a disproportionate impact on the entire stock market.

• The all important Consumer Price Index (CPI) data is ahead.  CPI will be released Thursday at 8:30am ET.  The consensus is 0.2% for both core and headline CPI.
• Producer Price Index (PPI) will be released on Friday at 8:30am ET.  The consensus is 0.2% for both core and headline PPI.
• The Fed released its latest Household Debt and Credit report.  Here are the key points:
  • Household debt hit $17T in the latest report.  $2.9T of that debt has accumulated from the end of 2019.
  • Credit card debt hit a record $1.03T, increasing 4.6% quarter-over-quarter.
  • Auto loans also increased, following the trend.
  • Student loan balances decreased to $1.57T.
  • Mortgage balances and home equity credit lines were stable.
• Especially important for prudent investors is the question about a potential recession.  In The Arora Report analysis, a recession has been postponed to 2024.  The main reasons are AI frenzy in the stock market, excessive consumer spending, leftover funds in consumers’ pockets from pandemic government programs, and Bidenomics.  The fact that credit card debt has reached a record shows that one source of spending is borrowing.  This cannot last forever.  
• 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.

China

The news is that China has entered deflation.  In The Arora Report analysis, it is nowhere near as bad as the headline appears for the following reasons.  

• July CPI came at +0.2% month-over-month vs. -01.% consensus.  This data indicates that prices went up in July, not down.
• CPI came at -0.3% year-over-year vs. -0.4% consensus.  This indicates that prices went down less than expected.
• We have been sharing with you for a while that prices at the producer level continue to fall.    We also shared with you related data yesterday that exports of Chinese goods fell.  We wrote:

Chinese exports fell by 14.5% year-over-year vs. 12.5% consensus.  Exports to the U.S. fell by 23%.  Exports to the E.U. and the Association of Southeast Asian Nations fell by 21%.  These are the biggest drops since the start of the pandemic.  Since China is the factory to the world, this indicates that the consumer demand for goods is falling.

• PPI came at -4.4% year-over-year vs. -4.4% consensus.
• The Chinese government has ordered economists to tone down negative pieces about the Chinese economy.
• In The Arora Report analysis, the data increases the probability of stimulus by the Chinese government.  Of course, these days stock markets everywhere, not just in the U.S., love government stimulus.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and AAPL.

In the early trade, money flows are negative in S&P 500 ETF SPY and Nasdaq 100 ETF QQQ.

The dichotomy between positive money flows in the magnificent seven stocks but negative money flows in index ETFs in the early trade sets the stock market up for an interesting day.  

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

API crude oil inventories came at a build of 4.067M barrels vs. a consensus of a draw of 0.233M barrels.

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 has moved above $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 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.

Gold futures are at $1957, silver futures are at $22.74, and oil futures are at $83.76.

S&P 500 futures are trading at 4524  as of this writing.  S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400 and 4318.

DJIA futures are up 22 points.

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

Raise Hedges

Hedges are being raised.  Please scroll down to the protection band section.  There will also be a separate post.

A Critical Junction

Please click here for a chart of Apple stock (AAPL).

Note the following:

• The Morning Capsule is about the big picture, not an individual stock.  The chart of AAPL is being used to illustrate the point.
• Apple stock is the largest stock in the market, has heavy weight in indexes, and is the most beloved stock perceived by many as a safe stock.  For this reason, whatever happens to Apple stock has a disproportionate impact on the entire stock market.
• The chart shows the Arora buy zone that helped newer members of The Arora Report buy AAPL near the recent lows resulting in large profits.  Long time members are holding AAPL from $4.68.
• The chart shows the trendline that held since the lows until Q2 earnings were released.  The chart shows when SIlicon Valley Bank failure occurred.  Due to the failure of Silicon Valley Bank and a few other banks at the same time, the Fed injected massive liquidity.  Some of that liquidity went into Apple stock and drove the stock higher.
• Going into earnings, Wall Street was very bullish on Apple, and bullish investors were hoping to drive Apple stock to about $210 after earnings.
• The Arora Report warned you ahead of earnings that fundamentals were deteriorating.  We wrote ahead of earnings:

From a fundamental perspective, the rise shown in AAPL stock on the chart has occurred with deteriorating earnings.  If the consensus is correct, AAPL is on track for three quarters in a row of declining revenues.

• RSI shown on the chart shows a divergence.  We wrote prior to earnings:

The chart shows RSI divergence.  In plain English, this means that RSI went lower as the stock price went higher.  From a technical perspective, this is a warning signal ahead of earnings.

• RSI on the chart shows that now Apple is oversold.
• The chart shows that Apple has now fallen to the top of the support zone.
• A major key for the entire stock market now is dependent on Apple not dipping much below the upper band of the support zone.  If Apple bounces from here or after only a slight dip in the buy zone, it will be positive for the stock market.  On the other hand, if Apple breaks below the support zone, it will be negative for the stock market. 
• Prudent investors should pay attention to the  market reaction to earnings from Datadog (DDOG).  Datadog has been pushed by many as an AI stock.  Earnings were better than expected, and the guidance, for the most part, was inline with consensus.  And yet, the stock has fallen 19% in the early trade.  The reason is that whisper numbers were much higher than the consensus due to exuberance over AI.
• In a significant negative development, Moody’s, one of the three major rating agencies, has cut credit ratings on ten U.S. banks due to office real estate exposure and higher funding costs.  In their exuberance, the momo crowd has run up stocks of regional banks disregarding issues with real estate loans and higher funding costs.  Moody’s also said that it may downgrade credit ratings of major U.S. lenders such as U.S. Bancorp (USB), Bank of New York Mellon Corp (BK), State Street Corp (STT), and Truist Financial Corp (TFC).  
• Chinese exports fell by 14.5% year-over-year vs. 12.5% consensus.  Exports to the U.S. fell by 23%.  Exports to the E.U. and the Association of Southeast Asian Nations fell by 21%.  These are the biggest drops since the start of the pandemic.  Since China is the factory to the world, this indicates that the consumer demand for goods is falling.  
• 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 are negative in AAPL and Tesla (TSLA), Microsoft (MSFT), Meta (META), Amazon (AMZN), Nvidia (NVDA), and Alphabet (GOOG)  in the early trade.

In the early trade, money flows are mixed in S&P 500 ETF SPY and in Nasdaq 100 ETF QQQ.

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 🔒 in 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 🔒.  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 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 $1959, silver futures are at $22.80, and oil futures are at $80.45.

S&P 500 futures are trading at 4507  as of this writing.  S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.

DJIA futures are down 232 points.

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

Earnings Drop

Please click here for a chart of the trucking firm Yellow Corporation (YELL).  YELL is the latest meme stock.

Note the following:

• The Morning Capsule is about the big picture, not an individual stock.  The chart of YELL is being used to illustrate the point.
• The chart shows when it became clear that the bankruptcy of Yellow was imminent.
• To most investors, bankruptcy is not good news, but the meme crowd is different.  The chart shows that the meme crowd aggressively bought YELL stock on the bankruptcy news.
• The chart shows that the meme crowd ran up YELL stock by 861% in three days.
• The news this morning is that Yellow has filed for bankruptcy.  How is the meme crowd responding to the news?  They are urging the crowd to double down and buy more YELL stock aggressively.
• In The Arora Report analysis, without the meme crowd activity, YELL stock is worthless. 
• It is very important right now for investors to track the sentiment.  The reason is that the stock market has risen on sentiment driven by the AI frenzy and Bidenomics while earnings have declined.
• An important indication of sentiment is the activity of the meme crowd. The meme crowd is the crowd that copies trades based on social media and believes that their collective buying can run up the stocks.
• The meme crowd often becomes resurgent when sentiment becomes very positive.
• The meme crowd was surging during the pandemic.  Theater chain AMC and video game retailer GME were top meme crowd favorites.  The meme crowd ran up GME from about $1 to over $120 (outside regular trading hours), and now the stock has fallen back to $21.  The meme crowd also ran up AMC from the $2 range to $72, and now the stock has fallen back to under $5.
• We previously shared with you:

• As discussed in yesterday’s Morning Capsule and many other prior capsules, prudent inventors track sentiment.  Sentiment plays a major part in the moves in the stock market.

  • As an example, the stock market rally in 2023 is mostly based on positive sentiment driven by the AI frenzy, resulting in PE expansion.

• The Arora Report members gain an edge with our proprietary sentiment indicator that is shared daily in the Afternoon Capsule.
• Companies are playing well the age old game of trying to run up their stocks.
  • Companies guided analysts to lower their earnings projections to such an extent that the companies knew they would be able to beat the lower projections.
  • As is the pattern, Wall Street analysts obliged and lowered their estimates.  So far, 422 of the 500 S&P 500 companies have reported their earnings. 79% of the 422 companies have beaten the lower estimates.  It is not different than most quarters when the vast majority of the companies beat the estimates that they themselves had deliberately guided analysts to lower.
  • Nobody is talking about the simple fact that earnings this quarter are down by 5.2% over the same quarter last year. 
  • Even though earnings are down compared to the same quarter last year, the stock market is significantly higher.  
• The mantra of the perma bulls is that this is the trough quarter of earnings.  Of course, perma bulls make this announcement every quarter in an attempt to run up the stock market.
• 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.

Audacious Move

Given the backdrop of Russia’s invasion of Ukraine and the potential Chinese invasion of Taiwan, China and Russia joined together to make an audacious move.  The largest ever warship group from the Chinese and Russian navies approached Alaska in a provocative move.  To counter Chinese and Russian moves, the U.S. sent four navy warships to the same waters.

This incident is a further reaffirmation that our prior major call is correct.  The major call is that the four megatrends that drove the 40 year secular bull market from 1982 to 2022 have ended.  One of the megatrends that has ended is lower defense spending, which helped stock markets throughout the world.  Going forward, the highest probability is of cyclical bull markets and cyclical bear markets.

For those who were not able to attend the event and want to understand in-depth as to how to proceed going forward, a recording of the event is available in Arora Ambassador Club.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), and Microsoft (MSFT).

In the early trade, money flows are negative in Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).

In the early trade, money flows are mixed in S&P 500 ETF SPY and positive in Nasdaq 100 ETF QQQ.

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 (BTC.USD) 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 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 $1971, silver futures are at $23.56, and oil futures are at $82.16.

S&P 500 futures are trading at 4516 as of this writing.  S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.

DJIA futures are up 115 points.