By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Hotter PPI
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 the Consumer Price Index (CPI) dip was aggressively bought yesterday.
- The chart shows that the stock market is now back at the low band of the micro resistance zone.
- Based on historical precedence, the stock market should have fallen over 1000 DJIA points yesterday on hotter CPI data. The momo crowd extremely aggressively bought the dip, resulting in the stock market closing down only 225 DJIA points.
- A new narrative from momo gurus has taken hold that inflation no longer matters because of their complete faith in President Trump’s leadership.
- The stock market also completely ignored Powell’s response to higher CPI data. Powell said:
- Policy will remain restrictive.
- Progress is being made on inflation, but it is not yet at the goal.
- Last night, stock market futures ran even higher on aggressive momo buying. In the early trade, the stock market gave up gains in stock futures prior to the release of the Producer Price Index (PPI), as many investors took advantage of the strength to sell on concerns that Trump will announce reciprocal tariffs today.
- Inflation at the producer level came hotter than expected. Here are the details:
- Headline PPI came at 0.4% vs. 0.2% consensus.
- Core PPI came at 0.3% vs. 0.3% consensus.
- Of utmost importance to prudent investors is that the PPI data for prior months has been significantly revised upwards.
- The momo crowd initially extremely aggressively bought stocks on hotter PPI. The buying was met by selling from investors who took notice of the prior revisions to the upside. The momo crowd bought the dip as other investors sold.
- A battle royale is shaping up between investors who are concerned about inflation and investors who believe inflation is not of consequence anymore because of President Trump’s leadership.
- In The Arora Report analysis, there is merit to President Trump’s leadership in pro-growth policies, reducing waste and fraud in the government, deregulation, tax cuts and tariffs. Having said that, it is a grave mistake to ignore inflation.
- These crosscurrents have already been included in the computation of the protection band. Please see the “Protection Band And What To Do Now” section below.
- Back in September 2024, when the Fed cut interest rates by 50 bps, we shared with you the contrary Arora call that the Fed was making a policy mistake. The CPI and PPI data, especially the prior month revisions, now confirm that the Fed made a mistake in September.
- The Arora Report has made dozens of contrary calls over decades regarding the Fed. One hundred percent of the prior calls have proven correct. So far, the call about the September 2024 rate cuts has proven spot on. Not only has the subsequent inflation data shown that the Fed made a mistake, but the yield on the 10- year bond has risen about 100 bps since the Fed’s 50 bps rate cut.
- Initial jobless claims came at 213K vs. 217K consensus.
- Retail sales will be released tomorrow at 8:30am ET.
- Prudent investors need to be aware that President Trump is threatening to impose reciprocal tariffs later today. There is a press conference scheduled for 1pm ET. Consider staying alert.
- 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. The protection band is one of the large number of unique edges that are available to members of The Arora Report.
Layoffs
More layoffs are coming in tech.
In important news, oil giant Chevron (CVX) will cut 20% of its workforce.
Seventy-five thousand federal workers have opted into Trump’s deferred resignation program.
Ultimately, these layoffs will start having an effect on the economy.
Europe
European stocks are seeing buying after Trump saying he is initiating talks with Russia’s Putin to end the Ukraine war.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Alphabet (GOOG), Nvidia (NVDA), and Tesla (TSLA).
In the early trade, money flows are neutral in Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), and Meta (META).
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 *** in the early trade.
Note for new members: Smart money often sells into the strength generated by momo crowd buying and buys into the weakness generated by momo crowd selling. Over a long period of time, investors come out ahead by adopting smart money’s ways. The exception is in a raging bull market – for very short term trades, consider following the momo crowd and not smart money.
Very Very Short-Term Indicator
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.
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
Trump spoke to Putin about ending the Ukraine war. Russia is a major oil producer, but the supply of Russia oil has been constrained due to U.S. sanctions. The thinking is that Trump will be Russia friendly, resulting in more Russian oil on the world market. As a result, oil is falling.
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
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.
S&P 500 futures are trading at 6083 as of this writing. S&P 500 futures resistance levels are 6131, 6256, and 6500: support levels are 6017, 5926, and 5748
DJIA futures are up 103 points.
Gold futures are at $2938, silver futures are at $32.56, and oil futures are at $70.44.
Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror. The proprietary protection band from The Arora Report is very popular. The protection band puts all of the data, all of the indicators, all of the news, all of the crosscurrents, all of the models, and all of the analysis in an analytical framework that is easily actionable by investors.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding *** in cash, Treasury bills, short term fixed income, 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.
A protection band of 0% would be very bullish and would indicate full investment with 0% in cash. A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.
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.
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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.
