Strong Economic Data Dow Winning Steak Similar To Famous Pre-Crash Streaks Of The Past

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

Strong Economic Data

Please click here for a chart of Global X Dow 30 Covered Call ETF DJIA

Note the following:

• The chart shows that DJIA has shown a winning streak for 13 consecutive days. DJIA is higher this morning in the premarket. If the trend continues, today may be the 14th consecutive high in DJIA.
• The chart compares DJIA to SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust Series 1 QQQ.
• The chart shows that DJIA is leading the other two leading indexes during this winning streak.
• Previously, DJIA had been lagging because it does not contain all of the magnificent seven stocks that have led the rally. The magnificent seven stocks are Apple Inc AAPL, Amazon.com, Inc. AMZN, Alphabet Inc Class C GOOG, Meta Platforms Inc META, Microsoft Corp MSFT, NVIDIA Corp NVDA, and Tesla Inc TSLA.
• It is said that history does not repeat itself, but it rhymes. In many ways, the DJIA winning streak is similar to pre-crash streaks of the past.
  • DJIA had a 13 day winning streak in January 1987. In October 1987, the stock market crashed, losing 22% in one day.
  • There are similarities to July 1929 when DJIA had a winning streak of 11 days. Subsequently, the stock market experienced the famous 1929 crash.
  • It is important to note that neither the 1929 nor 1987 streak resulted in a crash immediately.
• The economic data released this morning is very strong. Here are the details:
  • Q2 GDP-Adv came at 2.4% vs. 1.6% consensus.
  • Q2 GDP Deflator-Adv came at 2.2% vs. 3.0% consensus.
  • Durable orders came at 4.7% vs. 1.0% consensus.
  • Durable orders ex-transportation came at 0.6% vs. 0.2% consensus.
• All of the foregoing economic data represents lagging indicators. The Arora Report focuses on leading indicators. A leading indicator released this morning is initial jobless claims. Initial claims came at 221K vs. 233K consensus. This indicator carries heavy weight in the proven, adaptive ZYX Asset Allocation Model with inputs in ten categories. The model is adaptive in that it changes itself with market conditions. This adaptiveness is in part responsible for the success of The Arora Report. Please click here to see how the adaptiveness is achieved.  Most models on Wall Street are static. They work for a while and then stop working when market conditions change.
• There is aggressive buying in the premarket prompted by blowout earnings from META. META, along with five other magnificent seven stocks, is in the ZYX Buy Model Portfolio. The Model Portfolio provides buy zones, target zones, recommended quantities, stop zones, and updates as needed. The Model Portfolio is a good place to start for most investors. 
• As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.

Europe

The European Central Bank (ECB) decided to increase interest rates by 25 basis points in line with the consensus. ECB stated that future decisions will be to ensure rates are sufficiently restrictive.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying stocks in the early trade. Smart money is inactive in the early trade.

Gold

The momo crowd is selling gold in the early trade. Smart money is inactive in the early trade.

For longer-term, please see gold and silver ratings.

Oil

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.

Bitcoin

Bitcoin BTC/USD continues to trade below $30,000. Bitcoin bulls are disappointed that whales did not run it up on the Fed announcement like they have in the past.

Markets

Our very, very short-term early stock market indicator is positive but can quickly turn 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.