By Nigam Arora & Dr. Natasha Arora
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 ‘Protection Bands and What To Do Now.’
STOCK MARKET REJOICES BIDEN’S FAILURE TO INCREASE THE TAX RATE FOR CORPORATIONS
To gain an edge, this is what you need to know today.
Corporate Tax Rate
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- Before Trump, the corporate tax rate was 35%.
- When DJIA was 16,000, The Arora Report set a target of 30,000 for DJIA. At that time, nobody was talking about such a high target. Most analysts were predicting that the market would go down.
- After Trump’s election, many analysts were predicting a stock market crash. The Arora Report repeated the target of DJIA 30,000 in Trump’s first term. That prediction has proven spot on.
- One of the reasons behind repeating the prediction was an Arora call that Trump would succeed in cutting corporate tax rates. At that time The Arora Report provided a detailed analysis of the impact on earnings and on stock prices.
- Trump was successful in cutting the corporate tax rate from 35% to 21%.
- Biden first wanted to undo Trump’s corporate tax rate cut. After meeting opposition, Biden settled for 28%. After more opposition, Biden settled for 25%.
- The news is that Biden has failed to overcome the opposition and appears to have given up raising the corporate tax rate.
- After Biden’s election, many analysts gave sell signals due to Biden wanting to raise corporate tax rates. The Arora Report is a rare service that did not issue sell signals based on this reasoning. Our analysis that in the end Biden might not succeed has proven spot on.
- The market is rejoicing Biden giving up on a higher tax rate.
- The chart shows that the stock market has rallied for seven days.
- The chart shows that the RSI is diverging. In plain English, as the price is moving up, RSI is not moving up at the same rate.
- The chart shows that the rally is on a low volume. This indicates a lack of conviction.
- The chart shows that the prior resistance zone is now the top support zone.
- The chart shows that the stock market was running up in a smooth channel until September when it broke below the channel.
- The chart shows that the stock market is now approaching the low band of the channel and may meet some resistance.
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 🔒.
Gold
Gold has broken over the psychological resistance of $1800.
The momo crowd is 🔒 gold in the early trade. Smart money is 🔒.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒.
For longer-term, please see oil ratings.
Markets
Our very, very short-term early stock market indicator is 🔒. 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.
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 $1807, silver futures are at $24.57, and oil futures are $83.27.
S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400, and 4318.
DJIA futures are down 10 points.
Protection Bands and What To Do Now?
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold existing positions. Based on individual risk preference, consider holding 🔒 in cash or treasury bills or short-term bond funds 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.
NOVEMBER IS THE BEST MONTH OF THE YEAR FOR THE STOCK MARKET
To gain an edge, this is what you need to know today.
The Best Month
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- November is the best month of the year for the stock market since 1950. Of course, it goes without saying that even though history is a good guide, it does not always repeat itself.
- This year, the taper may start in November or December and that may make a difference. For the time being, the momo crowd is in charge and they have completely dismissed the taper.
- On the negative side, the start of the taper is the start of a change in the Fed’s policy. Historically, a change in the Fed’s policy roughly coincides with a drop in the stock market. There you have it – two opposite aspects of history are ahead.
- Historically, there is some weakness near the end of October.
- The pattern shown on the chart is bullish. However, RSI has flattened out as the price has moved up. This indicates that there is a 35% probability of a pullback.
- It is likely that the algorithms will reduce cash and hedges on a pullback.
Jobless Claims
Initial Jobless Claims came at 290K vs. 303K consensus.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 stocks in the early trade. Smart money is 🔒.
Gold
The momo crowd is 🔒 gold in the early trade. Smart money is 🔒.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒.
For longer-term, please see oil ratings.
Markets
Our very, very short-term early stock market indicator is 🔒. 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 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 $1783, silver futures are at $24.30, and oil futures are $82.85.
S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400, and 4318.
DJIA futures are up/down 77 points.
PAY ATTENTION TO THE POTENTIAL CONFIRMATION OF THE STOCK MARKET RALLY
To gain an edge, this is what you need to know today.
Confirmation
Please click here for a chart of copper ETF (CPER).
Note the following:
- Investors are looking for confirmation of the stock market rally.
- A popular method of confirmation is the copper to gold ratio.
- The lower pane of the chart shows the copper to gold ratio.
- Here is the theory behind this confirmation indicator.
- Copper is known as Dr. Copper because it usually moves up on economic strength.
- Gold is a safe haven.
- Copper is an industrial metal but gold is a financial metal.
- A rising copper to gold ratio indicates the economy is getting stronger and there is less need for a safe haven.
- The chart shows that the copper to gold ratio broke above the high from May 2021.
- At this time, the confirmation is not clear for the following reasons.
- We have been writing that there was a flaw in the analysis by the analysts to run up the stock market based on the first handful of earnings. Now more earnings are being released. Two of the most important earnings of this week are NFLX and TSLA.
- NFLX earnings were released yesterday after the close. The earnings were good but below whisper numbers. The guidance was not good. After trading above $660, the stock has pulled back to $626 as of this writing in the premarket. As full disclosure, a short sell signal was given in ZYX Short at $660 and the trade is now nicely profitable.
- Tesla earnings will be released after the market close today.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 stocks in the early trade. Smart money is 🔒.
Gold
The momo crowd is 🔒 gold in the early trade. Smart money is 🔒.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒.
For longer-term, please see oil ratings.
Markets
Our very, very short-term early stock market indicator is 🔒. 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 and bonds are range-bound. The 10-year yield is at 1.63% as of this writing.
The dollar is slightly 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 $1788, silver futures are at $24.17, and oil futures are at $81.37.
S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400, and 4318.
DJIA futures are down 3 points.
STOCK MARKET REACHES TOP OF RESISTANCE ZONE, BITCOIN FOMO
To gain an edge, this is what you need to know today.
Resistance Zone
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- The chart shows that the stock market is pushing against the top of the resistance zone.
- If the market breaks out from here, the probability of an S&P 500 move to the zone of 4750 to 5000 will dramatically increase.
- Keep in mind that November and December are seasonally strong months for the stock market.
- Until this morning, earnings have been better than expected. The stock market extrapolated a handful of the first set of earnings to assume that the rest of the earnings would be great.
- This morning we have earnings from Procter & Gamble (PG). PG is one of the largest consumer products companies in the world with brands such as Gillette, Crest, and Tide. PG earnings are less than the consensus. PG is facing problems related to inflation and supply chain issues.
- The market appears to be entering a phase where it focuses on good earnings but ignores bad earnings.
Housing
September Housing Starts came at 1.555M vs. 1.62M consensus.
Building Permits came at 1.589M vs. 1.67M consensus.
The foregoing indicates that the red-hot housing market is beginning to cool.
Bitcoin FOMO
Bitcoin FOMO is taking hold as the new bitcoin ETF starts trading today. A majority of the new buying is coming from retail traders and not from institutions.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 stocks in the early trade. Smart money is 🔒.
Gold
The momo crowd is 🔒 gold in the early trade. Smart money is 🔒.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒.
For longer-term, please see oil ratings.
Markets
Our very, very short-term early stock market indicator is 🔒. 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.
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 $1782, silver futures are at $24.08, and oil futures are at $81.44.
S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400, and 4318.
DJIA futures are up 120 points.
THE BEST LONG TERM OPPORTUNITY FOR INVESTORS BUT BE CAREFUL
To gain an edge, this is what you need to know today.
The Best Long Term Opportunity
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- The chart compares SPY with India ETF (EPI) and China ETF (ASHR).
- The chart shows that over the last year EPI has moved up 61.71%, SPY has moved 27.78% and ASHR has moved up 6.56%.
- We have repeatedly stated that India represented the best opportunity for long-term investors. That call has proven spot on.
- The performance of the Indian stock market shows why all investors should consider diversifying in international markets.
- India ETF EPI is in the Model Portfolio in ZYX Global Allocation. India and China have also been continuously followed in ZYX Emerging for a long time.
- The underperformance of China shown on the chart illustrates why investors need to be careful when buying emerging markets.
- As a note of caution, do not rush out to buy India. The Indian market is very expensive on a valuation basis and is technically overbought. It is important to wait for a pullback in the buy zone.
Inflation And Earnings Concerns
We previously shared with you that the U. S. stock market rallied on good earnings. But in our analysis, the underlying assumption was not sound. Earnings season has just started. Investors extrapolated from a handful of good earnings at the beginning of the season that all earnings would be good. Over the weekend, many investors are coming to the same conclusion that we shared with you early last week.
More and more investors are also realizing that the Fed has been wrong about inflation.
The foregoing two factors are bringing selling into the stock market in the early trade from the non-momo crowd.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 stocks in the early trade. Smart money is 🔒.
Gold
The momo crowd is 🔒 gold in the early trade as money continues to move to bitcoin. Smart money is 🔒.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒.
For longer-term, please see oil ratings.
Markets
Our very, very short-term early stock market indicator is 🔒. 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 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 $1762, silver futures are at $23.28, and oil futures are at $82.62.
S&P 500 futures resistance levels are 4460, 4600, and 4900: support levels are 4400, 4318, and 4200.
DJIA futures are down 176 points.
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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.
