Pay Attention To Wall Street Positioning Ahead Of Important Inflation Data, US General Warns Iran

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

Positioning

Please click here for a chart of Invesco QQQ Trust Series 1 QQQ.

Note the following:

• The chart shows that QQQ bounced from the top band of the mini support zone. This is a sign of strength for tech stocks.
• The chart shows that unlike S&P 500 (SPX) SPDR S&P 500 ETF Trust SPY, QQQ did not even come close to the 200 day moving average. This is again a sign of relative strength of tech stocks.
• The chart shows that RSI has quickly gone from oversold to overbought. This is due to the market mechanics of year end chase taking over.
• Important inflation data is ahead.
  • PPI will be released on October 11 at 8:30am ET. Consensus for the headline is 0.3% and for core is 0.2%.
  • CPI will be released on October 12 at 8:30am ET. Consensus for both the headline and core is 0.3%.
• In The Arora Report analysis, Wall Street is positioned for inflation numbers better than the consensus. Those interested in learning deeply about market mechanics of positioning, listen to the podcast “MARKET MECHANICS: POSITIONING.”
  • If the numbers come better than the consensus, Wall Street will be encouraged that they called it right. This will cause aggressive buying.
  • If the numbers come worse than the consensus, expect smart money to lightly sell and the market mechanic of year end chase to temporarily pause. Expect momo gurus to come up with a new narrative to persuade their followers to buy stocks.
• The International Monetary Fund is raising its projections for inflation to 5.8% for the next year. Only three months ago, the IMF had made a project of 5.2%. In The Arora Report analysis, this is not good news: however as of this writing the crowd is oblivious as market mechanics have taken over.
• There is plenty of Fed speak today that may move the markets, speakers include Raphael Bostic, Neel Kashkari, Christopher Waller, and Mary Daly. Investors are hoping that the Fed speakers will say the following:
  • The recent increase in long term rates has removed the necessity of further rate increases.
  • The Fed may cut sooner than what the Fed has been saying. 
• PepsiCo, Inc. PEP stock has been hit hard on concerns that weight loss drugs will significantly hurt Pepsi’s business. This morning Pepsi is reporting better than expected earnings and is guiding higher. More importantly Pepsi is not seeing any impact of weight loss drugs. This goes against the prevailing wisdom on Wall Street.
• Regarding the Middle East, Wall Street has concluded that the conflict will be limited to Gaza. Since Gaza has only 2M residents who are poverty stricken with an average income of $1200 per year, have no proper army, have no oil, and are under a complete siege by the Israelis, investors are not concerned about the carnage that is about to happen. The siege includes no electricity, no fuel, no food, and no medicines.
• To preempt Iran, General CQ Brown Chairman of the Joint Chiefs of Staff, is warning Iran “not to get involved.” The US decision to move a carrier strike group and fighter planes closer to Israel is for the purpose of preventing Iran from helping Palestinians in Gaza and escalating the conflict.  
• 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 positive in Microsoft Corp MSFT, Meta Platforms Inc META, and  Amazon.com, Inc. AMZN.

In the early trade, money flows are negative in Apple Inc AAPL, Alphabet Inc Class C GOOG, Tesla Inc TSLA, and NVIDIA Corp NVDA.

In the early trade, money flows are mixed in SPDR S&P 500 ETF Trust and Invesco QQQ Trust Series 1.

Momo Crowd And Smart Money In Stocks

The momo crowd is buying stocks in the early trade. Smart money is 🔒 in the early trade. To see the locked content, please click here to start a free trial.

Gold

The momo crowd is like a yo-yo in gold in the early trade. Smart money is 🔒 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. 

Oil

The momo crowd is like a yo-yo in oil in the early trade. Smart money is 🔒 in the early trade.

For longer-term, please see oil ratings.

The most popular ETF for oil is United States Oil ETF USO.

Bitcoin

Bitcoin BTC/USD is range bound.

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.

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 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.