Weekly Digest from The Arora Report is popular among serious investors and money managers because they have found studying insights from the prior week gives them an edge over the coming weeks. Here is the day by day rundown from the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers of The Arora Report.
Please scroll down for the section What To Do Now.
STRONG JOBS REPORT BUT MOMO BUYS ON TRUMP COMMENT
To gain an edge, this is what you need to know today.
Strong Jobs Report
Non-farm Private Payrolls came at 254K vs. 175K consensus.
Average hourly earnings came at 0.2% vs. 0.3% consensus.
Trump Comment
Trump’s new comment is that China trade talks are moving along.
China is reportedly looking at buying some soybeans and pork without tariffs as a goodwill gesture.
Momo Crowd And Smart Money In Stocks
The momo crowd is buying aggressively on Trump’s comment. Smart money is inactive.
Gold
Gold is being sold on the strong jobs report.
The momo crowd is selling gold. Smart money is inactive.
For longer term, please see gold and silver ratings.
Oil
Investors are still awaiting the final outcome of OPEC meeting.
The momo crowd is aggressively buying oil. Smart money is inactive.
For longer term, please see oil ratings.
Marijuana
The momo crowd is buying marijuana stocks. Smart money is inactive.
Technical Patterns
None of note.
This is powerful information and many investors use this to enter trades in addition to our official signals. Here are the three most common uses: 1) Short-term trades in ETFs 2) Decisions to trim or add to long-term positions, and 3) New option trades. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators. To learn more please click here.
Markets
Our very, very short-term early stock market indicator is positive but can quickly turn negative. 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.
Interest rates are ticking up and bonds are ticking down.
Dollar is stronger.
Gold futures are at $1472, silver futures are at $16.96, and oil futures are $58.04.
S&P 500 resistance levels are 3143, 3200 and 3223; support levels are 3125, 3100 and 3050.
DJIA futures are up 181 points.
MOMO CROWD BUYING STOCKS, REPUBLICANS READY TO TIE TRUMP’S HANDS, OPEC MEETING
To gain an edge, this is what you need to know today.
Puppy Dogs
All one has to do is watch gyrations in the stock market and Trump’s comments to know that Trump has successfully turned a segment of stock market investors into puppy dogs. At the same time, Republicans are beginning to get the nerve to tie Trump’s hands in small ways. Let’s explore with the help of two charts.
The Chart
Please click here for an annotated chart of ETF (DIA) which represents the popular index Dow Jones Industrial Average (DJIA).
Please click here for an annotated chart of S&P 500 ETF (SPY) that represents the benchmark S&P 500 Index (SPX). For the sake of full transparency, this chart was previously published at a time when stock market futures were running high before the latest drop in the stock market.
Note the following:
- The first chart shows the stock market fell over 400 Dow Jones Industrial Average points on Trump’s comments that it might be best for the phase one trade deal with China after the election.
- The first chart shows that the very next day the stock market jumped over 200 Dow Jones Industrial Average points on Trump’s comments that talks with China were going well.
- The first chart shows that Trump has been orchestrating the stock market rise with his near perfectly timed comments.
- The second chart gives you a better perspective of the technical condition of the market. The chart shows two prior patterns combining the price action, internal momentum and volume that are similar to the present pattern in the stock market. In both prior cases, the stock market declined. For details on interpreting the chart and other relevant macro data.
- The U. S. Senate is getting ready to pass a bill for sanctions against China for internment of over one million Uighur Muslims in the Xinjiang province in northwest China.
- Republicans are getting up the nerve to join Democrats to pass the bill.
- The bill is likely to have a veto-proof majority.
- Investors should note that Republicans are joining Democrats to force Trump to sign the bill that will certainly anger China.
- Previously Republicans joined Democrats to pass a bill to support democracy in Hong Kong. Since the bill was passed with veto-proof majority, Trump was left with no good choice but to sign it.
- As of this writing, the momo (momentum) crowd is again aggressively buying large-cap stocks such as Apple (AAPL), Amazon (AMZN), Facebook (FB) and Google (GOOG) (GOOGL).
- Semiconductors are early indicators. Semiconductors also have substantial sales in China. After a brief pullback, the momo crowd is again aggressively buying semiconductor stocks such as AMD (AMD), Intel (INTC), Micron (MU) and NVIDIA (NVDA).
- The momo crowd is also again aggressively buying popular momentum stocks such as Shopify (SHOP), The Trade Desk (TTD), Twilio (TWLO) and Okta (OKTA).
What does it all mean?
This stock market is controlled by the momo crowd. Clearly Trump understands that the momo crowd is fickle and can be moved in either direction based on momentum in the stock market. This is the reason that Trump is able to manipulate the momo crowd into behaving like puppy dogs.
The prevailing wisdom among the momo crowd is that the stock market will jump up 5 – 15% on phase one of the trade deal.
Jobless Claims
Jobless Claims came at 203K vs. 221K consensus.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively buying stocks in the early trade. Smart money is inactive.
Gold
There is no discernable momo crowd or smart money activity in gold.
For longer term, please see gold and silver ratings.
Oil
Oil is moving based on rumors from the OPEC meeting. The momo crowd is buying oil. Smart money is inactive.
For longer term, please see oil ratings.
Marijuana
The momo crowd is buying marijuana stocks. Smart money is inactive.
Technical Patterns
None of note.
This is powerful information and many investors use this to enter trades in addition to our official signals. Here are the three most common uses: 1) Short-term trades in ETFs 2) Decisions to trim or add to long-term positions, and 3) New option trades. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators. To learn more please click here.
Markets
Our very, very short-term early stock market indicator is positive but can easily turn negative. 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.
Interest rates are ticking up and bonds are ticking down.
The dollar is weaker.
Gold futures are at $1479, silver futures are at $16.92, and oil futures are $58.78.
S&P 500 resistance levels are 3125, 3143 and 3200; support levels are 3100, 3050 and 5020.
DJIA futures are up 79 points.
JOBS GROWTH SLOWS, INVESTORS BEHAVE LIKE PUPPY DOGS IN TRUMP’S HANDS
To gain an edge, this is what you need to know today.
Job Growth Slows
ADP is the largest private payroll processor in the country. ADP uses its data to give a glimpse of employment picture before the official numbers from the Department of Labor are released on Friday. ADP showed private payroll gain of 67K vs. 156K consensus.
Stock market futures should have fallen on this weak number but the stock market is going up as investors play puppy dogs at Trump’s hands.
Puppy Dogs
In yesterday’s Morning Capsule we wrote:
Investors ought to consider two important points.
- The stock market may go up if Trump postpones tariffs that are set to go into effect on December 15th.
- If Trump sees the stock market falling, he may start making positive noises about a deal with China.
Yesterday the market went down on Trump’s comment that it might be best for trade deal after the election. The stock market went down. This morning Trump says trade talks with China are going well and the stock market jumps. Investors are behaving like puppy dogs at Trump’s hands and ignoring all other data.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively buying stocks in the early trade. Smart money is inactive.
Gold
Gold investors and stock investors often live in two different worlds. Gold is being bought even after Trump’s comment this morning because gold investors do not believe Trump’s latest comment. Buying in gold started yesterday on Trump’s comment about trade. In contrast, stock market investors are believing Trump’s comment from today.
The momo crowd is buying gold. Smart money is inactive.
For longer term, please see gold and silver ratings.
Oil
API data came at a draw of 3.72M barrels vs. consensus of 1.8M barrel draw. Oil is running up on this larger than expected draw. Oil is also being affected from OPEC meeting.
The momo crowd is aggressively buying oil. Smart money is inactive.
For longer term, please see oil ratings.
Marijuana
The momo crows is aggressively buying marijuana stocks. There are early signs of a potential short squeeze. Smart money is inactive.
Technical Patterns
Junior gold miners are tracing a diamond bottom. This is bullish. ETF of interest is GDXJ. Before taking this trade please read the gold section above. Also ZYX Short has a small short position in GDXJ.
This is powerful information and many investors use this to enter trades in addition to our official signals. Here are the three most common uses: 1) Short-term trades in ETFs 2) Decisions to trim or add to long-term positions, and 3) New option trades. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators. To learn more please click here.
Markets
Our very, very short-term early stock market indicator is positive but can quickly turn negative. 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.
Interest rates are ticking up and bonds are ticking down.
The dollar is slightly weaker.
Gold futures are at $1484, silver futures are at $17.21, and oil futures are $57.03.
S&P 500 resistance levels are 3125, 3143 and 3200; support levels are 3050, 3020 and 2950.
DJIA futures are up 142 points.
RAISE PROTECTION, TRUMP’S NEW CHINA TRADE CALL GOOD FOR TRUMP BUT BAD FOR INVESTORS
To gain an edge, this is what you need to know today.
Raise Protection
Please see the ‘What To Do Now’ section.
Trade Deal
President Trump says China deal may be best after the 2020 election.
Contrary to the popular belief, postponing a trade deal with China after 2020 election may be good for Trump’s re-election and also for America. It may also be good for investors in the very long term but may hurt investors in the short term. Before you send me hate mail, remember that I gave a buy signal on the night Trump was elected and shortly thereafter made a call for Dow Jones Industrial Average (DJIA) to reach 30,000 when nobody was talking about such a high level in the stock market. Let’s explore with the help of a chart.
The Chart
Please click here for an annotated chart of S&P 500 ETF (SPY) that represents the benchmark S&P 500 Index (SPX). For the sake of full transparency, this chart was previously published at a time when stock market futures were running high before the latest drop in the stock market.
Note the following:
- The chart shows two prior patterns combining the price action, internal momentum and volume that are similar to the present pattern in the stock market. In both prior cases, the stock market declined.
- For details on interpreting the chart and other relevant macro data.
- I have previously written and emphasized that the stock market has been running up not because of better earnings, better economy or better geopolitics. Investors have been buying stocks simply because the market has been going up.
- Make no mistake that this stock market is controlled by the momo (momentum) crowd.
- The momo crowd is fickle and can easily start selling if the momentum reverses. Herein lies the danger to investors.
- Investors should pay attention that in spite of excellent sales data for black Friday and black Monday, smart money flows have temporarily turned negative in Amazon (AMZN) and Apple (AAPL) while the momo crowd continues to buy them aggressively. Money flows have also slowed in popular stocks such as Facebook (FB), Google (GOOG) (GOOGL), Microsoft (MSFT) and Netflix (NFLX).
- Semiconductor stocks have been the leading indicators. Smart money flows have temporarily turned negative in NVIDIA (NVDA), AMD (AMD), Micron (MU) and neutral in Intel (INTC).
- Smart money flows have also temporarily turned negative in some of the best performing stocks such as Walmart (WMT), Target (TGT) and Disney (DIS).
- Smart money flows have also turned negative in stocks that are favorites of the momo crowd such as Shopify (SHOP), The Trade Desk (TTD), Twilio (TWLO) and Okta (OKTA). Smart money flows are also neutral in Salesforce (CRM), a popular stock that the momo crowd has been aggressively buying.
Trump Re-election
If Trump were to reach the skinny phase one deal with China, the following are the most likely outcomes:
- Democrats will get a good target to shoot at. After all there is not much substance in the phase one deal.
- Many in Trump’s own base may be disappointed because of how little the phase one covers.
- The material weaknesses of the phase one deal may bring into focus that Trump’s policy of tariffs has failed.
Isn’t it better for Trump’s re-election to not reach a deal but amplify the bluster against China?
Two Important Points
Investors ought to consider two important points.
- The stock market may go up if Trump postpones tariffs that are set to go into effect on December 15th.
- If Trump sees the stock market falling, he may start making positive noises about a deal with China.
Protect Yourself
As a full disclosure, The Arora Report has just raised cash and hedge levels but are still holding good long term positions. The Arora Report also has in progress a short term trade on inverse leveraged ETF (SQQQ) that goes up when the market goes down. Also in progress is a short position on Nasdaq 100 ETF (QQQ) that profits from the market going down.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively selling stocks. Smart money is also lightly selling stocks.
Gold
Gold is being bought as money flows out of stocks and into gold. The momo crowd is buying gold. Smart money is also lightly buying gold.
For longer term, please see gold and silver ratings.
Oil
There is no material smart money or momo crowd activity in oil ahead of OPEC meeting.
For longer term, please see oil ratings.
Marijuana
The momo crowd is selling marijuana stocks. Smart money is inactive.
Technical Patterns
None of note.
This is powerful information and many investors use this to enter trades in addition to our official signals. Here are the three most common uses: 1) Short-term trades in ETFs 2) Decisions to trim or add to long-term positions, and 3) New option trades. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators. To learn more please click here.
Markets
Our very, very short-term early stock market indicator is negative. 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.
Interest rates are ticking down and bonds are ticking up.
The dollar is weaker.
Gold futures are at $1488, silver futures are at $17.21, and oil futures are $55.98.
S&P 500 resistance levels are 3100, 3125 and 3143; support levels are 3050, 3020 and 2950.
DJIA futures are down 303 points.
BELIEVE IN SANTA CLAUS RALLY BUT LOOK AT THIS CHART FIRST, CHINA DATA
To gain an edge, this is what you need to know today.
Santa Claus Rally
The Santa Claus rally refers to the rise in the stock market in the last week of December and lasting during the first two trading days of January. The reason is low liquidity makes it easier to push the market up by investors in the festive holiday mood. Typically the stock market is also positive in December in a strong year like this year. Last year was an exception when the stock market fell in December.
A lot is aligned for a strong December ahead but prudent investors ought to first take a close look at this chart.
The Chart
Please click here for an annotated chart of S&P 500 ETF (SPY).
Note the following:
- The chart shows three points when RSI was overbought on a weekly chart.
- The chart shows that for each of these three points the volume has been low.
- The point to the left most on the chart shows a rise similar to the one happening now in the stock market. This rise was followed by a decline in the stock market.
- The point in the middle shows a rise similar to the rise being seen in the stock market now. This rise was followed by a big decline in the stock market.
- The chart shows Arora buy signal given right at the bottom of the last decline.
- The chart shows that the Arora long term portfolios were up to 62% protected prior to the big fall.
- The chart also shows a short term trade in Nasdaq 100 ETF (QQQ) on leveraged ETF (SQQQ) to profits from the decline.
- The right most point shown on the chart is for the present stock market. The rise in the stock market, overbought RSI and low volume are similar to the last two times shown on the chart. The last two times the rise was followed by a decline. This is a big negative.
- An overbought stock market tends to be vulnerable precisely at a time when not many see a good reason for a decline as is the case now. This is a caution flag.
- Performance chase is on. In performance chase, lagging money managers tend to throw caution to the wind and buy strong performing stocks in an attempt to catch up with their benchmarks. This is a big part of buying that is occurring in mega-caps such as Apple (AAPL), Amazon (AMZN), Facebook (FB) and Microsoft (MSFT). Semiconductors have been great performers. Stocks such as Intel (INTC), AMD (AMD), Micron (MU) and Applied Materials (AMAT) may see more buying by lagging money managers. This is a positive.
- A big part of tax loss selling is already done. This is a positive.
- Investors with large gains in taxable accounts are reluctant to sell before the year-end because they do not want to pay capital gains taxes this year. This is a positive.
- If the momentum in the stock market reverses, those with large gains, especially hedge funds, may want to sell to lock in profits. Such selling may accelerate the downward momentum. Looking ahead, this is a caution that investors should keep a careful eye on.
- There is a significant amount of economic data ahead including the jobs report this Friday. The data has the potential to cause a short term blip.
- The stock market is fixated on the phase one of a trade deal with China. December 15th is an important date when new tariffs are scheduled.
- The stock market is assuming that at a minimum the new tariffs will be postponed and perhaps the trade deal with China will be reached before December 15th.
- So far China does not seem to be tying the U. S. support for Hong Kong to the trade deal. China sees the U. S. support for Hong Kong as interference in its internal affairs. This may make China demand more concessions from Trump and Trump may not be willing to grant such concessions. If a trade deal is not reached and new tariffs are implemented, look out below.
- There is no parallel to last December in terms of the Fed. Last year the Fed was in the mode of increasing interest rates. Now the Fed is on hold. The primary reason for the big fall in the stock market last year was Fed tightening.
Dow 30,000 Magnet
Historically big round numbers have acted at magnet for investors.
When I gave a “buy” signal on Donald Trump’s election at a time when many were predicting a big stock market drop, it was at first met with incredulity. When I called for a high-probability scenario of the Dow Jones Industrial Average (DJIA) hitting 30,000 points in Trump’s first term, I received a ton of hate mail. I have subsequently repeated that call in Trump’s first term several times.
Dow 30,000 is the next magnet.
What Does It All Mean?
Make no mistake that this stock market is controlled by the momo (momentum) crowd. Buying is taking place not because of better earnings, better economy or better geopolitics, but because of the upside momentum. Keep in mind that the momo crowd is fickle and can turn on a dime. Investors ought to consider following a proven adaptive model such as ZYX Asset Allocation Model that has performed well in both bull and bear markets. Investors ought to be particularly cautious in following static models, please click here to see the reasons. We provide specific cash levels, hedges and positions to hold. In general, the model is cautiously bullish. This is also a good time for investors to take advantage of short term trades as opportunities arise in addition to long term positions.
With Dow 30,000 magnet, many long term investors may chose not to sell until this level is reached. When there is a dearth of sellers, the path of least resistance for the stock market is up.
China Data
China’s Manufacturing Purchasing Manager’s Index (PMI) came at 50.2 vs. 49.5 consensus. This number generated optimism in Asia, then Europe and now in the U. S. stock market.
Momo Crowd And Smart Money In Stocks
The momo crowd is buying stocks in the early trade. Smart money is inactive.
Gold
There is no discernable smart money or momo crowd activity in gold.
For longer term, please see gold and silver ratings.
Oil
Saudi Arabia is looking for long term production cuts from OPEC. This is generating optimism in oil.
The momo crowd is buying oil. Smart money is inactive.
Natural gas prices have crashed on warm weather forecast.
For longer term, please see oil ratings.
Marijuana
The momo crowd is buying marijuana stocks. Smart money is inactive.
Technical Patterns
None of note.
This is powerful information and many investors use this to enter trades in addition to our official signals. Here are the three most common uses: 1) Short-term trades in ETFs 2) Decisions to trim or add to long-term positions, and 3) New option trades. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators. To learn more please click here.
Markets
Our very, very short-term early stock market indicator is neutral but expect the market to open higher on China data. 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.
Interest rates are ticking up and bonds are ticking down.
The dollar is slightly weaker.
Gold futures are at $1466, silver futures are at $17.02, and oil futures are $56.25.
S&P 500 resistance levels are 3200 and 3223; support levels are 3125, 3100 and 3050.
DJIA futures are up 25 points.
WHAT TO DO NOW
Looking ahead and not only in the rear view mirror, consider continuing to hold existing core portfolio positions. Based on individual risk preference, consider holding cash or treasury bills 23% – 33% and short to medium-term hedges of 5% – 15% and short term hedges of 15% – 20%.
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