Contrasting Moves

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 to the top band of the top support zone on rising yields.
• This morning the stock market is moving up, bouncing from the support zone on news from the Middle East.
• Prudent investors should notice a statement by Iran’s Foreign Minister Hossein Amirabdollahian in Beirut, Lebanon.  He warned that there was a “real possibility” of opening other fronts if Israel continues to intensify the war in Gaza.
• Prudent investors should also pay attention to a statement by Ali Barakeh, a senior Hamas official, that Iran and Hezbollah “will join the battle if Gaza is subjected to a war of annihilation.”
• Of special interest is that the momo crowd aggressively bought stocks on these two statements, while smart money is buying safe havens of the dollar, Treasuries, gold, and silver.
• Israel has ordered 1.1M Palestinians living in northern Gaza to evacuate within 24 hours and move to southern Gaza.
• The problem is that Gaza is one of the most densely populated places on Earth.  It is very small – only 140 square miles.  It appears that there is simply not enough space in southern Gaza for 1.1M more people.
• The United Nations is warning that the evacuation order is “impossible and could result in devastating humanitarian consequences.”
• The momo crowd is aggressively buying stocks on the Israeli evacuation order.  Smart money is buying safe havens of dollar, Treasuries, gold, and silver.
• Bank earnings this morning from JPM, WFC, C, and PNC are better than expected.  Earnings from UNH, the largest healthcare insurer, are also better than expected.
• Prudent investors should note that Jamie Dimon, the CEO of JPM and the most respected banker in the world, is saying in the JPM earnings report that “now may be the most dangerous time the world has seen in decades.”
• In view of the news from the Middle East and Jamie Dimon’s statement, investors should pay attention to money flows in the Magnificent Seven stocks and indexes.  Please see the section below.
• In The Arora Report analysis, it is important that investors pay attention to not only what is happening but how the market is responding.  Stocks are being bought on trust in market mechanics pushing the stock market higher.
• Some of the buying in the stock market is being triggered by Danish company Novo Nordisk (NVO) raising its growth targets due to the popularity of weight loss drugs Ozempic and Wegovy.  Eli Lilly (LLY) stock is also moving up in sympathy.
• 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 positive in Amazon (AMZN), Nvidia (NVDA), 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 *** (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 *** gold 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 *** oil 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 today is Friday, and there will be two opposing crosscurrents.  On the positive side, if the market continues to move up there will likely be a short squeeze.  On the negative, many institutional investors will likely lighten up by selling into the strength not wanting to take the risk of news from the Middle East going into the weekend.  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 $1924, silver futures are at $22.63, and oil futures are at $86.12.

S&P 500 futures are trading at 4394 as of this writing.  S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.

DJIA futures are up 120 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.

Hotter Consumer Inflation

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 ran up above the top band of the top support zone in anticipation of better than expected Producer Price Index (PPI) and Consumer Price Index (CPI) as well as the market mechanics of year end chase and market positioning.
• Yesterday, we shared with you that PPI came hotter than expected, but bullish investors chose to ignore it.  Please read yesterday’s Capsules for more on PPI.  Bullish investors chose to pin their hopes on CPI coming better than expected and market mechanics.
• This morning, CPI came worse than expected.  Here are the details:
  • Headline CPI came at 0.4% vs. 0.3% month-over-month consensus.
  • Core CPI came at 0.3% vs. 0.3% month-over-month consensus.  Of special note is that the whisper numbers for Core CPI were 0.2%. 
  • Wall Street was positioned for 0.2% Core CPI.
• Now, there are two strikes against Wall Street positioning and bulls’ hopes in the form of PPI and CPI.
• Stock futures were running up ahead of the release of CPI on hopes of better than expected numbers.  On release of CPI, the stock market took a slight dip.  The momo crowd aggressively bought the dip and is trying to run up the stock market as of this writing.
• In The Arora Report analysis, even though progress is being made on inflation, core inflation is staying sticky, way above the Fed’s 2% target.  This means that the Fed is likely to keep rates higher for longer but may be reluctant to raise rates. You may recall that The Arora Report’s call for a while has been that core inflation will stay sticky.  So far, that call is spot on.
• Earnings season starts tomorrow, although a fair number of earnings were reported this morning.  Earnings are expected to be inline with consensus; however, earnings this morning are mixed.
• Going forward, bulls’ faith in market mechanics to run up the stock market will be tested as their predictions on the data have been wrong.
• Here are the probabilities of Fed interest rate hikes:
  • 10% in November
  • 33% in December
• Initial jobless claims came at 209K vs. 214K consensus.  This indicates that the job picture, especially at the low end, remains very strong.  The job picture remains weak in information technology.  During the pandemic, information technology had the strongest demand.
• 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.

India

Inflation in India slowed and has now come back to the target zone set by the Reserve Bank of India.  CPI came at 5.02% year-over-year vs. 5.50% consensus.

In The Arora Report analysis, this is good news.  However, even though India is the best large economy opportunity for long term investors, in the short term, India’s stock market is overbought and valuations are too high.  If the Indian market dips, it will be a buying opportunity.  To see the buy zone for India and The Arora Report’s short term, medium term, and long term ratings, please see ZYX Emerging.  ZYX Emerging has continuously covered India for 16 years.

China

China’s sovereign wealth fund, which is controlled by the Chinese government, bought more stock in China’s largest banks.  As this has not happened since 2015, speculation is growing that the Chinese government will increase its efforts to help the Chinese stock market.

In The Arora Report analysis, this maneuver by the Chinese government will only have a limited impact on the stock market.  

Magnificent Seven Money Flows

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

In the early trade, money flows are negative in Microsoft (MSFT) and Tesla (TSLA).

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 *** stocks in the early trade.  Smart money is *** stocks in the early trade.

Gold

Gold is attempting to break the psychological resistance at $1900. 

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 inventories came at a build of 12.94M barrels vs. a consensus of a build of 1.3M barrels.

The momo crowd is *** oil in the early trade.  Smart money is *** oil in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) bulls are getting concerned that bitcoin may be forming a head and shoulders pattern.  This is a negative pattern.  Bitcoin is trading under $27,000 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 down, 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 $1892, silver futures are at $22.26, and oil futures are at $85.17.

S&P 500 futures are trading at 4413 as of this writing.  S&P 500 futures resistance levels are 4460, 4600, and 4713: support levels are 4400, 4318 and 4200.

DJIA futures are up 37 points.

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

Hotter Producer Inflation

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 moved up above the top band of the top support zone.  The move up was driven primarily by market mechanics.
• Bulls are confident that market mechanics will drive the stock market to the mini resistance zone shown on the chart.
• Bulls have data to back up their belief.  About two thirds of the market rise this year is due to market mechanics.  Market mechanics tend to become extra powerful in November and December.  Bulls are also pointing to the historical data that shows that the year end chase is to the upside in a year when the stock market has been up more than 10% going into the last quarter. Of course, prudent investors need to take into account the current conditions that are unique to this year.  All investors should strive to develop deep knowledge of market mechanics to gain a big edge.  Due to the high value, Wall Street professionals keep the details of market mechanics close to their chest.  The best way to learn about market mechanics is to listen to the podcasts in Arora Ambassador Club.
• Producer Price Index came hotter than expected.  Here are the details:
  • Headline PPI came at 0.5% vs. 0.3% consensus.
  • Core PPI came at 0.3% vs. 0.2% consensus.
• Wall Street has been positioned for better than expected PPI and CPI.  Today PPI has dashed bulls’ hopes, but they are hanging tough, trusting that market mechanics will drive the stock market higher irrespective of the data.
• CPI will be released tomorrow at 8:30am ET.  The latest consensus is 0.3% for both the headline and core.
• San Francisco Fed President Mary Daly commented that the neutral rate may now be at 3%.  Stock market bulls are still hoping for a neutral rate of less than 2%.
• The Fed minutes will be released at 2pm ET.  There is plenty of Fed speak ahead including Atlanta Fed President Raphael Bostic, Fed Governor Christopher Waller, and Boston Fed President Susan Collin.
• In The Arora Report analysis, the stock market is expecting dovish Fed minutes and dovish Fed speak.  Hawkish Fed minutes or any hawkish Fed speak may cause the stock market to move down.
• The consensus in the market is that Israel will crush Hamas in Gaza as long as there is no northern front.  The market has also concluded that there will be no northern front. However, prudent investors should stay alert to what is happening in the north.  Rockets have been fired by Hezbollah from the north.  Hezbollah is closely aligned with Iran.
• Exxon (XOM) buying Pioneer Natural Resources (PXD) for $58B is generating positive sentiment.
• 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 positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).

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 *** stock 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 *** oil 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 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 $1886, silver futures are at $22.19, and oil futures are at $84.98.

S&P 500 futures are trading at 4408 as of this writing.  S&P 500 futures resistance levels are 4460, 4600, and 4713: support levels are 4318, 4200, and 4000.

DJIA futures are up 69 points.

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

Positioning

Please click here for a chart of Nasdaq 100 ETF (QQQ).

Note the following:

• The chart shows that QQQ bounced from the top band of the mini support zone.  This is a sign of strength for tech stocks.
• The chart shows that unlike S&P 500 (SPX) ETF SPY, QQQ did not even come close to the 200 day moving average.  This is again a sign of relative strength of tech stocks.
• The chart shows that RSI has quickly gone from oversold to overbought.  This is due to the market mechanics of year end chase taking over.
• Important inflation data is ahead.
  • PPI will be released on October 11 at 8:30am ET.  Consensus for the headline is 0.3% and for core is 0.2%.
  • CPI will be released on October 12 at 8:30am ET.  Consensus for both the headline and core is 0.3%.
• In The Arora Report analysis, Wall Street is positioned for inflation numbers better than the consensus.  Those interested in learning deeply about market mechanics of positioning, listen to the podcast “MARKET MECHANICS: POSITIONING.”
  • If the numbers come better than the consensus, Wall Street will be encouraged that they called it right.  This will cause aggressive buying.
  • If the numbers come worse than the consensus, expect smart money to lightly sell and the market mechanic of year end chase to temporarily pause.  Expect momo gurus to come up with a new narrative to persuade their followers to buy stocks.
• The International Monetary Fund is raising its projections for inflation to 5.8% for the next year.  Only three months ago, the IMF had made a project of 5.2%.  In The Arora Report analysis, this is not good news:  however as of this writing the crowd is oblivious as market mechanics have taken over.
• There is plenty of Fed speak today that may move the markets, speakers include Raphael Bostic, Neel Kashkari, Christopher Waller, and Mary Daly.  Investors are hoping that the Fed speakers will say the following:
  • The recent increase in long term rates has removed the necessity of further rate increases.
  • The Fed may cut sooner than what the Fed has been saying.
• Pepsi (PEP) stock has been hit hard on concerns that weight loss drugs will significantly hurt Pepsi’s business.  This morning Pepsi is reporting better than expected earnings and is guiding higher.  More importantly Pepsi is not seeing any impact of weight loss drugs.  This goes against the prevailing wisdom on Wall Street.
• Regarding the Middle East, Wall Street has concluded that the conflict will be limited to Gaza.  Since Gaza has only 2M residents who are poverty stricken with an average income of $1200 per year, have no proper army, have no oil, and are under a complete siege by the Israelis, investors are not concerned about the carnage that is about to happen.  The siege includes no electricity, no fuel, no food, and no medicines.
• To preempt Iran, General CQ Brown Chairman of the Joint Chiefs of Staff, is warning Iran “not to get involved.”  The US decision to move a carrier strike group and fighter planes closer to Israel is for the purpose of preventing Iran from helping Palestinians in Gaza and escalating the conflict.
• 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 positive in Microsoft (MSFT), Meta (META), and Amazon (AMZN).

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

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 *** 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 *** 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 up, and bonds are ticking down.

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 $1868, silver futures are at $21.82, and oil futures are at $85.93.

S&P 500 futures are trading at 4372 as of this writing.  S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.

DJIA futures are up 46 points.

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

Bloodshed

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:

• Over 1300 people have been killed in Israel and Gaza.  The bloodshed has broad implications for investors.
• The chart shows that last week after touching the 200 day moving average market ran up to the top band of the prior top support zone.  The top support zone is now resistance.
• Before the market ran up, the headline of Morning Capsule read: ‘BLOWOUT JOBS REPORT BUT EXPECT THE MOMO CROWD TO TRY TO RUN UP THE MARKET ON HOURLY EARNINGS’.  The momo crowd was focused on hourly earnings coming in at 0.2% vs 0.3% consensus.  Momo crowd completely ignored that nonfarm payrolls came in at 336K vs 158K consensus.
  • In The Arora Report analysis, the Fed is not going to ignore the big rise in payrolls.
• The chart shows that the market has pulled back to the bottom band of the top support zone on bloodshed in the Middle East.
• The stock market is assuming that the conflict in the Middle East will be contained to Gaza.
• Prudent investors need to think about what happens to the stock market if there is a wider conflict.
• In The Arora Report analysis, there is a high probability that the attack on Israel was masterminded by Iranians.  Further it is almost 100% that the attack would have not been possible without support from Iran.  Here is the key question, “Will Israel and the United States ignore Iran or will they go after Iran?”  The answer depends in part on what happens with Hezbollah in Lebanon.  If Iran wants to escalate, Hezbollah will likely open a second front against Israel in northern Israel.
• In The Arora Report analysis, Iran is extremely important, because the Strait of Hormuz is a choke point.  The Strait of Hormuz is the only sea route from the Persian Gulf to the ocean.  At its narrowest, the Strait is only 21 nautical miles wide.  
• 17M barrels per day of oil travels through the Strait of Hormuz.
• In The Arora Report analysis, Iran is capable of blocking the Strait of Hormuz.
• In The Arora Report analysis, if Iran were to block the Strait of Hormuz, oil would jump to over $300 per barrel.  As a reference, West Texas Intermediate Crude (CL_F) is trading at $86.12 as of this writing.  The oil is rising about 4%.
• In The Arora Report analysis, Hamas attack has ruined Biden’s grand plan for security, Middle East peace and his reelection.  Please read the Morning Capsule dated October 5, 2023 titled ‘BIGGEST OIL DROP IN A YEAR ON BIDEN’S SECURITY PLAN.’
• In The Arora Report analysis, Biden needs lower oil prices for his reelection.  Biden was planning to lower oil prices by offering security guarantees and civilian nuclear technology to Saudi Arabia in return for lower oil prices and normalization of relations with Israel.  Saudia Arabia was demanding better treatment of Palestinians.
• In The Arora Report analysis, the events of the weekend have broader implications of Middle Eastern oil.
  • Ukraine cannot continue to fight Russia if the flow of Western weapons stops.  Indications are that there is celebration in Moscow.
  • Among major powers China stands out as a country that has failed to strongly condemn the attack on Israel.  If the US gets bogged down in the Middle East, it gives China an opening to attack Taiwan.
• In The Arora Report analysis, prudent investors should note that a very important financial development this morning. Based on history, money should have rushed into the safety of US Treasuries causing the yields to fall significantly.  However, bonds are up significantly less than expected.  What could be the reason?
• In The Arora Report analysis, bonds are not up as much as expected because the U.S. will be sending aid to Israel.  Where is the money going to come from?  Of course, from more borrowing.  Bonds are under pressure primarily because of heavy treasury borrowing needs that are ahead.
• Investors are rushing to buy defense stocks this morning.
• In The Arora Report analysis, for the time being investors are putting their trust in the market mechanic of year end chase and buying the dip.  Most years the year end chase is to the up side.  However as explained in detail in the podcast “MARKET MECHANICS: GAIN AN EDGE FROM YEAR END CHASE” the year end chase can also be to the downside.  In 2022, the year end chase was to the downside.  It is important for investors to understand the market mechanics of year end chase in depth.  The podcast is available in the Arora Ambassador Club.
• 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 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 *** 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 seeing slight selling.

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 $1861, silver futures are at $21.78, and oil futures are at $85.98.

S&P 500 futures are trading at 4312  as of this writing.  S&P 500 futures resistance levels are 4400, 4460. and 4600: support levels are 4200, 4000, and 3950.

DJIA futures are down 168 points.