Investors Anticipate Six Rate Cuts In Europe, ADP Data Supports Goldilocks, Unit Labor Costs Fall
To gain an edge, this is what you need to know today.
Goldilocks
Please click here for a chart of Germany’s DAX futures (NASDAQ:DAX).
Note the following:
- Germany is the economic engine of Europe.
- The chart shows a very strong stock rally in Germany.
- RSI on the chart shows that after the strong rally, stocks have become overbought.
- The chart shows that technical resistance is ahead.
- In The Arora Report analysis, consensus is building among investors that the European Central Bank (ECB) will cut rates six times by a quarter point each in 2024.
- In The Arora Report analysis, there is a high probability of ECB beginning rate cuts before the Fed.
- The newly released Automatic Data Processing Inc (NASDAQ:ADP) data supports a Goldilocks economy. ADP is the largest payroll processor in the country and uses its data to give an advanced glimpse of the jobs picture ahead of the official jobs report that will be released on Friday at 8:30am ET.
- ADP employment change came at 103K vs. 127K consensus.
- There is more good news for the stock market but not so much for working people.
- Q3 Unit Labor Costs-Rev. came at -1.2% vs. -0.8% consensus. Unit labor costs going down is a big positive for the stock market.
- Productivity in the U.S. has taken a remarkable jump.
- Q3 Productivity-Rev. came at 5.2% vs. 4.8% consensus.
- The increase in productivity and the decline in unit labor costs are great news for the U.S. as a country and for the stock market. Expect gurus to spin this data as increased productivity due to artificial intelligence. Don’t fall for it. Artificial intelligence has not yet become pervasive in the U.S. economy. However, artificial intelligence will become pervasive over the coming seven years, and it will further boost productivity. A fortune is to be made over the next seven years in artificial intelligence.
- 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.
For The First Time Ever
We have been sharing with you that India represents one of the best large economy opportunities outside the U.S. for long term investors. We recently shared with you the recent election results and our analysis that it was very positive. Now, for the first time ever, the Indian stock market’s total capitalization has hit $4 trillion.
ZYX Emerging has covered India for 16 years in its Core Model Portfolio. In addition to the Core Model Portfolio, ZYX Emerging also has a separate portfolio of specialty ETFs. One of the specialty ETFs representing small caps in iShares MSCI India Small-Cap ETF (BATS:SMIN) is up 31.2% year to date.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Apple Inc (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).
In the early trade, money flows are positive in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively buying stocks in the early trade. Smart money is 🔒 stocks in the early trade. To see the locked content, please click here to start a free trial.
Gold
The momo crowd is buying gold in the early trade. Smart money is 🔒 gold in the early trade.
For longer term, please see gold and silver ratings.
The most popular ETF for gold is SPDR Gold Trust (NYSE:GLD). The most popular ETF for silver is iShares Silver Trust (NYSE:SLV).
Oil
API crude inventories came at a build of 0.594M barrels vs. a consensus of a draw of 2.267M barrels.
The momo crowd is selling 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 (NYSE:USO).
Bitcoin
Bitcoin (CRYPTO: BTC) has crossed $44,000 as of this writing.
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 seven 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.
