Houthi Victory Raises Risks; Hotter CPI Pushes Fed Rate-Hike Odds To 88%

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88% Probability Of A Rate Hike

Please click here for an enlarged chart of SPDR S&P 500 ETF Trust (NYSE:SPY)/a> which represents the benchmark stock market index S&P 500 (SPX).

Note the following:

li>The chart shows that yesterday the stock market dipped into zone 1 (support)./li> li>RSI on the chart shows that yesterday the stock market was approaching the oversold level./li> li>The chart shows that this morning the stock market is bouncing and is now trading above the top band of zone 1 as of this writing./li> li>Overall, the news is not good this morning, but the stock market is trading higher for the following reasons:

li>Positioning had become overly negative ahead of CPI release. Positioning is a very important Wall Street mechanic that often produces counterintuitive moves in the stock market. Investors gain a big edge when they understand positioning. /li> li>Oil pulling back after becoming overbought in the short term/li> li>The usual short squeeze that often occurs on Fridays/li> li>Dip buyers stepping in after four days of losses/li> li>Good earnings from Oracle Corp (ORCL) are bringing buying into tech stocks./li> li>Also helping tech stocks is Microsoft Corp (NASDAQ:MSFT) move to triple its data center capacity by 2032./li> /ul> /li> li>In the early trade, Wall Street machines are jumping in on the stock buying bandwagon./li> li>We shared with you an important development yesterday:/li> li>The momo crowd is oblivious, but prudent investors should pay attention to an important development in Yemen. Iran backed Houthis have won the battle for the port city of Mokha. This may be a turning point in the civil war in Yemen. The reason investors should care is that Houthis may end up asserting more control over Bab el-Mandeb Strait, which is one of the most important trade routes, especially for oil these days./li> li>Houthi victory has triggered WTI oil to spike above $100. WTI is the U.S. standard for oil./li> li>As of this writing, the stock market and oil are not focusing on Houthi victory but are being driven by a report that foreign ministers of Gulf countries will meet Iran’s foreign minister next week./li> li>Consumer Price Index (CPI) came slightly hotter. Here are the details:

li>Headline CPI came at 0.4% vs. 0.4% consensus./li> li>Core CPI came at 0.3% vs. 0.2% consensus./li> /ul> /li> li>After the release of CPI data, Fed fund futures are now indicating about a 88% probability of a rate hike next week when the Fed meets. /li>

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis.

In the early trade, money flows are positive in Amazon.com, Inc. (AMZN), Alphabet Inc Class C (GOOG), Meta Platforms Inc (META), Microsoft Corp (MSFT), NVIDIA Corp (NVDA), and Tesla Inc (TSLA).

In the early trade, money flows are neutral in Apple Inc (AAPL).

In the early trade, money flows are positive in S&P 500 ETF (SPY) and Invesco QQQ Trust Series 1 (QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (NYSE:USO)/a>.

Bitcoin

Bitcoin is seeing buying.

What To Do Now

Consider continuing to hold good, very long term, existing positions and add tactical positions based on signals.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.

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