By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Buying In The Stock Market
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 is decisively below the trendline.
- The chart shows that the stock market is stabilizing at the level where it fell yesterday after the release of hotter Consumer Price Index (CPI).
- Stock futures were down before the release of Producer Price Index (PPI). Stock futures jumped on the release of PPI data.
- PPI came tamer than expected. Here are the details:
- Headline PPI came at 0.2% vs. 0.3% consensus.
- Core PPI came at 0.2% vs. 0.2% consensus.
- In The Arora Report analysis, PPI is more well behaved compared to CPI because PPI is mostly goods oriented. Cheaper goods from China are flooding the market. Of note is that inflation is going the other way in China compared to the U.S. Here is the latest data from China:
- CPI came at 0.1% vs. 0.1% consensus.
- PPI came at 0.1% vs. 0.1% consensus.
- Weekly initial claims came at 211K vs. 218K consensus. This indicates that the jobs picture is remaining strong.
- Statistically, yesterday’s fall of 1% in S&P 500 was the fifth such fall in 2024. In the prior instances in 2024, S&P 500 gained an average of 1% the following day. Those who buy based on statistics are aggressively buying stocks.
- 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.
Europe
The European Central Bank (ECB) is keeping its key interest rate at 4%, in line with consensus. ECB is preparing to cut rates in June. This is helping to bring buying into the stock market.
It is likely that the paths of the ECB and the Fed are diverging.
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 *** (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 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 (BTC.USD) is seeing aggressive buying. Bitcoin is above $70,000.
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 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 $2358, silver futures are at $28.13, and oil futures are at $85.61.
S&P 500 futures are trading at 5212 as of this writing. S&P 500 futures resistance levels are 5256, 5400, and 5500 : support levels are 5210, 5020, and 4918.
DJIA futures are up 5 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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This post was just published on ZYX Buy Change Alert.
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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.
