Fed’s Problem: How To Slow Down The Runaway Stock Market Train Driven By Market Mechanics

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

The Fed’s Problem

Please click here for a chart of Invesco QQQ Trust Series 1 (NASDAQ: QQQ).

Note the following:

The chart shows that the stock market has had a significant rally since the beginning of November.
The chart shows Arora buy signals.
The chart shows that the stock market is consolidating right at the low band of the resistance zone.
RSI shows that the stock market can go either way but the probability to the upside is higher.
CPI data will be released tomorrow at 8:30am ET, and PPI will be released on Wednesday at 8:30am ET. Both have the potential to move the stock market, but the market will really be waiting for the Fed.
The FOMC meeting starts tomorrow. The FOMC rate decision will be announced Wednesday at 2pm ET followed by Powell’s press conference at 2:30pm.
The Fed has a problem. In The Arora Report analysis, the rise in the stock market has considerably loosened financial conditions. Financial conditions have become significantly looser than the Fed likely wants at this time.
In The Arora Report analysis, the Fed needs to be very careful as the stock market is positioned to twist whatever the Fed and Powell say to move the runaway stock market train faster. Here is the key question for investors: Will the Fed be able to put the breaks on the runaway stock market train?
The primary driver behind the runup in the stock market is a group of three market mechanics. Historically, market rallies driven by these market mechanics at this time of the year take a pause or even have a slight pullback right about now, before another leg up.  The tentative plan is to use any pullback to buy. The more you understand about market mechanics, the more money you will extract from the markets. To help you, a new podcast titled “Market Mechanics Trump Mother Of All Reports – A Look Ahead” is in production.  The podcast will be in Arora Ambassador Club.  
Two other factors driving the stock market higher are the following:

AI frenzy
Consensus of five rate cuts in 2024

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.

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