UNPRECEDENTED BANK OF ENGLAND INTERVENTION RESCUES MOMO CROWD AFTER APPLE RUINS THE RALLY

Twitter
LinkedIn
Facebook

By Nigam Arora & Dr. Natasha Arora

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

Bank Of England

Please click here for a chart of  Nasdaq futures (NQ_F).

Note the following:

  • Start out by reading yesterday’s Afternoon Capsule.
  • The chart shows aggressive buying by the momo crowd in after hours.  The momo crowd was encouraged that their buying was able to hold up the market yesterday.
  • The chart shows when the news came that demand for iPhone 14 was faltering, leading Apple (AAPL) to give up on plans to increase production.  Apple had plans to increase production in anticipation of higher demand.
  • During this market decline, Apple stock has continued to levitate.
    • Many investors are treating Apple as a safe stock, and they use Apple stock akin to a money market fund.  When they sell other stocks due to a declining market, instead of parking the money in a money market fund, they are parking money in Apple stock.
  • The chart shows a drop in Nasdaq stock futures on the Apple news.
  • The Apple news triggered a set up for a 5% – 10% drop in the stock market.  
  • Across the pond, Bank of England was staring at a financial crash in the UK as large margin calls were coming due today on gilts.  A gilt is a UK government bond issued in sterling.
  • Gilts had seen a dramatic fall after UK’s Prime Minister Liz Truss decided she wanted to be Margaret Thatcher and Ronald Reagan but without taking into account different financial conditions at this time. During this high inflationary period, she announced massive tax cuts and energy support to be financed by borrowing.
  • The financial markets concluded that her plan was like putting gasoline on the inflation fire.  
  • BoE was left with no choice but to proceed with unprecedented intervention on an emergency basis to buy long dated gilts.
  • The purchases are designed to move up the gilts to get rid of the margin calls.  Do you still believe that the UK is a capitalist, free market?
  • The chart shows when the BoE announcement came.
  • The chart shows aggressive buying on BoE announcement.
  • BoE has three objectives:
    • Buy long dated gilts
    • Stop selling bonds as they had previously announced to reduce  the balance sheet they had built up due to money printing
    • Be ready to raise interest rates
  • Without buying bonds, BoE would have needed to raise interest rates by 2% – 3% to rescue the currency, but that would not have avoided the crisis of margin calls on gilts.  Raising the rates would have made already big margin calls significantly bigger.
  • As the morning has progressed, momo gurus are busy propagating two new narratives to run up the stock market.
  • BoE has blinked.  The Fed is not far behind.
  • The Apple news is based on data from Apple suppliers – since the data is not from Apple itself, ignore it and buy Apple stock.
  • As the new momo narratives spread, the momo crowd is aggressively buying stocks as they are coming to believe that the Fed is about to blink.
  • As you read the following, keep in mind that The Arora Report is politically agnostic.  Our sole job is to help investors without a political lens.  Of interest is that we get a large number of emails from our members who are Republicans saying that our writings are sympathetic to Democrats.  We also get a large number of emails from our members who are Democrats  saying that our writings are sympathetic to Republicans.
  • In The Arora Report analysis, the new momo narratives are wrong.  
    • In our analysis, despite what you may think about the Biden administration, Biden is highly unlikely to make the same mistake that Liz Truss made.  
    • In our analysis, the Fed is not facing the dire situation that BoE was facing.  The Fed is not about to back off from fighting inflation unless the data changes.  
    • There are five Fed speakers today.  What these Fed officials say may shed some light on their thinking about BoE intervention.
    • Unfortunately, instead of objectively analyzing the Fed speak and helping investors, the five Fed speakers today will provide five opportunities for momo gurus to twist their words to run up the stock market. 
  • 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 VUD indicator has been mostly orange, but has turned solid green as of this writing on aggressive momo buying and lack of smart money selling.
See also  MOMO CROWD DOES NOT BELIEVE THE FED AND AGGRESSIVELY BUYS STOCKS

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial) stocks in the early trade.  Smart money is 🔒 in the early trade.

Gold

The momo crowd is 🔒 gold in the early trade.  Smart money is 🔒 in the early trade.

For longer-term, please see gold and silver ratings.

Oil

The momo crowd is 🔒 oil in the early trade.  Smart money is 🔒 in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin is range bound under $20,000

Markets

Our very, very short-term early stock market indicator is 🔒 as the market will move based on how successful momo gurus are at twisting the Fed speak.  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 stronger.

Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.

Gold futures are at $1643, silver futures are at $18.28, and oil futures are at $79.68.

S&P 500 futures resistance levels are 3770, 3860 and 3950: support levels are 3630, 3600 and 3520.

DJIA futures are up 131 points.

Protection Bands And What To Do Now?

It is important for investors to look ahead and not in the rearview mirror.

See also  OPTIMISM OVER DISNEY AND SEASONALITY BUT NEWS FROM CHINA DISAPPOINTS

Consider continuing to hold existing positions. Based on individual risk preference, consider holding 🔒 in cash or treasury bills or allocated to short-term tactical trades; and short to medium-term hedges of 🔒, and short term hedges of 🔒. 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.

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.

To take a free 30-day trial to paid services to gain access to more opportunities, please click here.

Markets can generate substantial wealth for knowledgeable investors. NOW YOU TOO CAN ALSO SPECTACULARLY SUCCEED AT MEETING YOUR GOALS WITH THE HELP OF THE ARORA REPORT. You are receiving less than 2% of the content from our paid services. …TO RECEIVE REMAINING 98% INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES, TAKE A FREE
TRIAL TO PAID SERVICES.

See also  BULLISHNESS CREATED BY BANK OF CANADA TURNING DOVISH BALANCED BY RECESSION FEARS AND PUTIN WARNING

Please click here to take advantage of a FREE 30 day trial.

Nigam Arora

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

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.

Subscribe to 'Generate Wealth'

Free Forever

More To Explore

30 Day Free Trial

Cancel within 30 days and you owe nothing

When you take a FREE 30 day trial, you get access to powerful techniques used by billionaires and hedge funds to grow richer. You can continue to use these powerful techniques to grow richer even if you cancel your subscription. You come out ahead by subscribing no matter how you look at it.

Do you want to gain an edge in the markets? Join thousands of your fellow investors and money managers to subscribe to Generate Wealth newsletter.

FREE FOREVER

Follow The Most Accurate Stock Market Analysis

Unrivaled Insights
In Bull and Bear Markets

Generate Wealth Newsletter
Free Forever

Generate Wealth Newsletter
Free Forever