LATCHING ONTO A STRAW TO AGGRESSIVELY BUY STOCKS

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

Latching Onto A Straw

Please click here for a chart of Nasdaq 100 ETF (QQQ).

Note the following:

• The chart shows when momo crowd latched onto a straw in Powell’s answer to a question in his testimony in front of the Senate and started aggressively buying stocks.
• Buying is especially aggressive in momo stocks that have lost 30 – 80% of their value and are likely to lose more as the Fed raises rates.
• The straw that momo latched onto was a Powell statement that no decision has been made on reducing the Fed’s balance sheet.
• Momo gurus are spinning the narrative that there may be another month or two before long-duration momo stocks go down, so for the time being buy them.
• Momo and their gurus ignored the two most important things Powell said about the balance sheet.
  • The Fed balance sheet at $9 trillion is simply too large and needs to be reduced.
  • The Fed expects to reduce the balance sheet at a significantly faster rate compared to the last time
• Both of the foregoing points are negative for the long-duration aggressive momo stocks that the momo crowd is buying today. 

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• In the Morning Capsule we wrote:

Overall, this is a positive technical pattern.  Many bulls are contending that the bottom is in.  Before you get excited, some historical perspective is important.

QQQ has traded down more than 2.5% intraday but finished positive 15 times since 2003.  However, this pattern happened 46 times in the period of 1999 – 2002.  QQQ crashed in 2000.

• Due to the positive technical pattern, those who trade purely on technicals are jumping in to buy.
• The higher the market goes, the stronger the belief will become that the bottom is in.
• Prudent investors should wait for the inflation data that we discussed in Monday’s Morning Capsule before any change in strategy.  If inflation data is stronger than the consensus, expect smart money to sell the rally.  If the inflation data is weaker than expected, then the plan will be to initiate some buying.  
• The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.
• The chart shows that VUD indicator was solid green during the initial buying, but has failed to continue solid green as the day has progressed.  This indicates that there are sellers in the market willing to sell to the momo crowd at these prices.  The sellers are likely hedging against bad inflation data.

Money Flows

The momo crowd money flows since the Morning Capsule are 🔒 (To see the locked content, please take a 30 day free trial).

Smart money flows since the Morning Capsule are 🔒.

Short squeeze money flows are 🔒.

A Special Note To New Subscribers

Note the smart money behavior.  Smart money tends to sell into strength on strong up days.

New subscribers should consider adopting smart money’s  way of investing and trading.

Sentiment

Sentiment is very 🔒.

Sentiment is a contrary indicator at extremes.  In plain English, this means that when sentiment becomes extremely positive it is time to sell and when sentiment becomes extremely negative it is time to buy.

Gold

The momo crowd money flows in gold are 🔒 since the Morning Capsule.

Smart money flows are 🔒 in gold since the Morning Capsule.

Oil

The momo crowd money flows in oil are 🔒 since the Morning Capsule.

Smart money flows in oil are 🔒 since the Morning Capsule.

Buy Zones And Buy Now Ratings

🔒

Nibbling

🔒

Close

There appear to be  buy  on close orders.

There is merit to watching the pattern of market on close orders as they represent the day’s dominant net cumulative activity  by many professionals and funds.

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Nigam Arora

Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.

Dr. Natasha Arora

Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.