<figure class="wp-block-image size-large"><img src="https://imageproxy.pbkrs.com/https://thearorareport.com/wp-content/uploads/2025/12/2025-12-18_08h41_46.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://thearorareport.com/wp-content/uploads/2025/12/2025-12-18_08h41_46.png"/></figure>



<h4>Better Than Expected Inflation Data</h4>



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



Note the following:



<ul>
<li>The chart shows that the stock market is moving up on better than expected inflation data and Micron Technology Inc. (NASDAQ:MU) projections.</li>



<li>The chart shows that the stock market is in between zone 1 (support) and the magnet.</li>



<li>RSI on the chart shows that the stock market is coming out of the oversold zone and thus has significant room to run to the upside.</li>



<li>Here are the details of Consumer Price Index (CPI) data:
<ul>
<li>Headline CPI came at 0.2% (2-month change September-November) vs. 0.3% consensus. Year-over-year CPI now stands at 2.7% vs. 3.0% prior.</li>



<li>Core CPI came at 0.2% (2-month change September-November) vs. 0.3% consensus. Core CPI year-over-year now stands at 2.6% vs. 3.0% prior.</li>
</ul>
</li>



<li>In our analysis, looking below the surface at various components of the CPI data, CPI is significantly better than expected.  This increases the probability of a rate cut in January to 60%.  President Trump is likely to use the Bank of England (BOE) and the European Central Bank (ECB) decisions to put pressure on the Fed.  Please see the U.K. and Europe sections below.</li>
</ul>



<ul>
<li>Initial jobless claims came at 224K vs 229K consensus.  This data is inline with our expectations. </li>



<li>Blowout earnings from memory maker Micron (MU) are bringing buying in the AI trade in the early morning. Here are the key points:
<ul>
<li>Micron is guiding Q2 EPS of $8.42 vs. $4.71 consensus. </li>



<li>High Bandwidth Memory (HBM) is sold out through calendar year 2026.</li>



<li>Customers are engaging in multiyear agreements.</li>



<li>Micron is projecting a total addressable market for HBM of $100B.</li>



<li>Micron is guiding gross margins of 68%.</li>



<li>Micron is guiding CapEx to $20B from $18B.</li>
</ul>
</li>



<li>In our analysis, due to AI, the memory upcycle this time is likely to be more sustainable compared to past cycles.  Memory goes through boom and bust cycles.  As full disclosure, MU is in our portfolio. We are long MU from $21.77.</li>
</ul>



<h4>U.K.</h4>



The BOE cut its key interest rate to 3.75% from 4%. Four of nine members wanted to keep the rate at 4%.



BOE expects inflation to reach its 2% target in 2027.



<h4>Europe</h4>



ECB leaves its key rate unchanged at 2%. ECB is also raising its growth forecast for 2026 and 2027. ECB expects inflation to reach its 2% target in 2028.



<h4>Magnificent Seven Money Flows</h4>



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. (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 neutral in Apple Inc (NASDAQ:AAPL).



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



<h4>Momo Crowd And Smart Money In Stocks</h4>



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 (USO).



<h4>Bitcoin</h4>



Bitcoin (CRYPTO: BTC) is range bound. 



<h4>What To Do Now</h4>



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.



<h4>Traditional 60/40 Portfolio</h4>



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.



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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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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.

The stock market is rising due to better-than-expected inflation data and bullish projections from Micron Technology. Headline CPI is at 0.2%, increasing the likelihood of a rate cut. Micron's strong earnings and guidance boost AI trade. The BOE cut rates, while the ECB held steady. Investment strategies suggest holding long-term positions and considering protection bands for risk management.

- The stock market is rising due to better than expected inflation data and positive projections from Micron Technology.  
- Headline CPI registered at 0.2% over two months, lower than the 0.3% consensus, indicating a potential 60% chance of a Federal Reserve rate cut in January.  
- Micron's strong earnings and guidance suggest a sustainable memory upcycle, while the Bank of England and European Central Bank's rate decisions may influence the Fed's policies.

Better Than Expected Inflation Data, Bullish Micron Projections Bring Buying In AI Trade