By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Hotter Inflation
Please click here for a chart of Tesla stock (TSLA).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of TSLA stock is being used to illustrate the point.
- The chart shows the run up in TSLA stock.
- The chart shows the Arora buy signal after the election. As of this writing, there is 50% gain in about five weeks from the Arora buy signal in TSLA.
- RSI on the chart shows TSLA stock is overbought. Overbought stocks are susceptible to a pullback.
- The chart shows the nearest support zone.
- TSLA stock has added $515B in value since Trump’s election. The valuation of Tesla and SpaceX have been rising on the belief that Musk’s close association with Trump will help his businesses. The rally in TSLA stock, along with the rising valuation of SpaceX, has made Elon Musk the first man ever to have a net worth of $400B.
- The move yesterday in TSLA stock was initially triggered by General Motors’s (GM) decision to stop development of robotaxis. The buying in TSLA stock on the GM news caused TSLA to breakout above the prior high. This brought in technically oriented buyers who buy the breakouts. The prior high was $414.49 on November 4, 2021.
- After yesterday’s sticky Consumer Price Index data that was not worse than expected, the market was certain the Fed will cut interest rates, so investors aggressively bought big tech stocks. Lower interest rates are good for big tech. For those wanting a next level understanding, listen to the podcasts in Arora Ambassador Club.
- Producer Price Index (PPI) data came hotter than expected. Here are the details:
- Headline PPI came at 0.4% vs. 0.3% consensus.
- Core PPI came at 0.2% vs. 0.2% consensus.
- The reaction to PPI data is slight selling in stocks, bonds, and gold.
- In The Arora Report analysis, the Fed is likely to ignore the hotter producer inflation data and cut interest rates next week.
- Initial jobless claims came at 242K vs. 220K consensus. In The Arora Report analysis, the Fed can use this data as an excuse to cut interest rates given the Fed’s dual mandate.
- To understand extreme positive sentiment right now, all a prudent investor needs to do is look at the valuation of Fartcoin (FARTCOIN). Fartcoin is now worth $500M. What makes Fartcoin so valuable? It produces a digital fart sound on each transaction.
- The positive sentiment is being enhanced this morning as President-elect Trump is going to ring the opening bell at the New York Stock Exchange.
- 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.
Switzerland
The Swiss National Bank cut interest rates by 50 bps, which was more than expected. This is the largest cut in nearly a decade.
Europe
The European Central Bank (ECB) cut interest rates by 25 bps as expected.
Rate cuts in Europe influence the Fed to also cut interest rates.
Magnificent Seven Money Flows
In the early trade, money flows are neutral in Apple (AAPL).
In the early trade, money flows are negative in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Tesla (TSLA).
In the early trade, money flows are negative 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
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 above $100,000.
Markets
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.
S&P 500 futures are trading at 6078 as of this writing. S&P 500 futures resistance levels are 6131 and 6256: support levels are 6017, 5926, and 5748.
DJIA futures are down 47 points.
Gold futures are at $2729, silver futures are at $32.60, and oil futures are at $70.31.
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.
