To gain an edge, this is what you need to know today.
Please click here for a chart of China ETF Xtrackers Hvst CSI 300 China A-Shs 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 iShares 7-10 Year Treasury Bond ETF IEF and long bond Treasury ETF iShares 20 Plus Year Treasury Bond 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.com, Inc. AMZN, NVIDIA Corp NVDA, Microsoft Corp MSFT, Alphabet Inc Class C GOOG, Meta Platforms Inc META, Tesla Inc TSLA, and Apple Inc AAPL.
In the early trade, money flows are negative in SPDR S&P 500 ETF Trust SPY and mixed in Invesco QQQ Trust Series 1 QQQ.
Momo Crowd And Smart Money In Stocks
The momo crowd is buying stocks in the early trade. Smart money is selling stocks in the early trade.
The momo crowd is buying gold in the early trade. Smart money is inactive in the early trade.
For longer-term, please see gold and silver ratings.
The most popular ETF for gold is SPDR Gold Trust GLD. The most popular ETF for silver is iShares Silver Trust SLV.
The momo crowd is buying oil in the early trade. Smart money is inactive in the early trade.
For longer-term, please see oil ratings.
The most popular ETF for oil is United States Oil ETF USO.
Bitcoin BTC/USD is range bound.
Our very, very short-term early stock market indicator is negative. 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.
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. To see the locked content, please click here to start a free trial.
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.
The Arora Report is known for its accurate calls. The Arora Report correctly called the 2008 financial crash, the start of a mega bull market in 2009, the COVID crash, the post-COVID bull market, and the 2022 bear market. Please click here to sign up for a free forever Generate Wealth Newsletter.