Lower Core CPI

Please click here for an enlarged chart of JPMorgan Chase & Co (NYSE:JPM).

Note the following:

• This article is about the big picture, not an individual stock.  The chart of JPM stock is being used to illustrate the point.  JPMorgan (JPM) has kicked off earnings season.
• The chart shows JPM stock did not enter zone 1 (resistance) on earnings.  Immediately after reporting earnings, JPM stock spiked but then pulled back.  Almost every quarter, JPM stock follows this pattern after earnings.
• The chart shows a steady rise in JPM stock since the April 2025 low.
• JPMorgan earnings are roughly inline with consensus and whisper numbers.  Trading revenues were very strong.  Investment banking revenues are less than consensus.  We are long JPM is long from an average of $34.14.  JPM is trading at $323.49 as of this writing in the premarket.
• For those not in JPM stock, our call is to buy JPM stock on a dip in our buy zone.
• Also released this morning are important earnings from Delta Air Lines Inc (NYSE:DAL).  Earnings are less than consensus and whisper numbers.
• Core Consumer Price Index (CPI) data came cooler than expected.  Here are the details:
  • Headline CPI came at 0.3% vs. 0.3% consensus.
  • Core CPI came at 0.2% vs. 0.3% consensus.
• In the early trade, there has been aggressive buying in the stock market due to core CPI coming cooler than expected.  As of this writing, S&P 500 futures have crossed above 7000.
• ADP data shows that the private sector added an average of 11,750 jobs per week over the four weeks ending December 20.
• A dichotomy has developed between the stock market and gold over the Powell investigation.
  • The stock market is not concerned at this time about the Fed potentially losing its independence.  In the stock market, there was a brief battle between the momo crowd and smart money.  The momo crowd aggressively bought yesterday's morning dip due to the Powell investigation.  To the momo crowd, if the Fed loses its independence, it is a good thing because it will mean lower interest rates.
  • The gold market is very concerned about the Fed potentially losing its independence.  Investor behavior is very different in the gold market compared to the stock market.  Investors are buying gold as an antidote to the potential loss of the Fed's independence.
• President Trump is very focused on the affordability theme leading to the mid-term election.
  • President Trump is urging support for the Credit Card Competition Act that would curb swipe fees.
  • President Trump also aims to reduce soaring electricity prices due to AI data center demand.  President Trump wants tech companies to pay the cost.
  • Microsoft Corp (NASDAQ:MSFT) is announcing an initiative to offset the impact of AI data centers on local communities.  Microsoft is announcing five core principles to achieve this goal.
• Of note is President Trump is imposing 25% tariffs on Iran's business partners.  Iran's biggest business partner is China.  China imports about 90% of Iran's oil.  Here is the key question: Will President Trump enforce this tariff on China and thereby increase friction with China, or will China be exempt, making this tariff meaningless?
• Supply chain shifts away from China continue.  Google (GOOG, GOOGL) will develop and manufacture high end smartphones from scratch in Vietnam.  We have followed Vietnam continuously for 19 years.  As full disclosure, VanEck Vietnam ETF (BATS:VNM) is in our portfolio.
• Results of the $22B 30-year Treasury bond auction will be announced at 1pm ET.  If the auction is weak, it may be market moving.
• Bank of America Corp (NYSE:BAC), Citigroup Inc (NYSE:C), and Wells Fargo & Co (NYSE:WFC) will report earnings tomorrow in the premarket.  BAC and C are in our ZYX Buy.

Japan

Japan is important because of its impact on the carry trade in the U.S.

Stocks in Japan hit a new high, but the yen weakened on confirmation that Takaichi plans for a snap election.  Prudent investors should pay attention as this is significant.  Right now, Takaichi has a razor thin majority.  She hopes to gain a bigger majority to push through stimulus programs. Weakening yen is raising the specter of intervention by the Bank of Japan (BOJ).

As full disclosure, iShares MSCI Japan ETF (NYSE:EWJ) and Invesco CurrencyShares Japanese Yen Trust (NYSE:FXY) are in our portfolio.

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 Alphabet Inc Class C (NASDAQ:GOOG), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are neutral in Amazon.com, Inc. (NASDAQ:AMZN) and Meta Platforms Inc (NASDAQ:META).

In the early trade, money flows are negative in Apple Inc (NASDAQ:AAPL) and Microsoft Corp (NASDAQ:MSFT).

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

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 (NYSE: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).

Bitcoin

Bitcoin (CRYPTO: BTC) is range bound.

What To Do Now

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. 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.

A protection band of 0% would be very bullish and would indicate full investment with 0% in cash.  A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.

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 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.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.

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