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

Follow The China Rally

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

Note the following:

• Yesterday when the market was down, we were getting emails from money managers and professional traders as to why we were not giving a short sell signal.  These emails were prompted primarily by sell signals from several traditional technical analysis systems.
• In response we wrote in yesterday’s Afternoon Capsule:

In response to your emails, be extra careful if deciding to short sell the market. We have been writing about September being the weak month but the VUD indicator being mostly green should give short-sellers a pause.  Unless there is news or new developments, momo may succeed in rallying the market.

• We also wrote yesterday in the Afternoon Capsule:

Of note is that smart money is not selling..

• The chart shows ‘follow the China rally.’
• Stocks in Hong Kong rose 1.9% on optimism created by the phone call between President Biden and China’s Xi.  The call came at a time when Americans are binging on Chinese goods bringing the trade deficit with China to a record level.
• The momo crowd is excited that Biden is not addressing the continued large transfer of wealth from the United States to China. This is certainly positive for the stock market in the short run.  Momo crowd is myopic and focused on the short term.
• For long-term prudent investors, the continued transfer of wealth from the United States to China should be of serious concern.  This is the reason that smart money is increasingly diversifying its holdings outside the United States.
• 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 the VUD indicator is green indicating net demand for stocks in the early trade.

Inflation

Producer Price Index (PPI) came at 0.7% vs. 0.6% consensus.

Core PPI came at 0.6% vs. 0.6% consensus.

The data indicate that inflation is still running hotter than expected.

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

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

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

Oil

Biden and Xi phone call is creating optimism in 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 $1796, silver futures are at $24.10, and oil futures are $69.79.

S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400, and 4318.

DJIA futures are up 173 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.

EUROPEAN CENTRAL BANK SLOWS BOND PURCHASES, JOBLESS CLAIMS DROP

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

ECB Slows Bond Purchases

Please click here for a chart of the balance sheet of ECB.

Note the following:

• The chart shows a rapid rise in the balance sheet in Europe just like the United States.
• This is important to stock market investors because the stock market has been rising, in part, due to money printing by central banks.
• The Fed is the most powerful central bank in the world.  ECB is the second most powerful.
• The news from the ECB meeting is that ECB will moderately lower the pace of asset purchases under the Pandemic Emergency Purchase Programme (PEPP).
• PEPP was implemented in March 2020 with a potential total value of $2.19 trillion and is due to end in March 2022.
• ECB does not want to call this a taper.
• In August, eurozone inflation was running at 3% – a decade high exceeding expectations.
• Output in the eurozone is likely to exceed the pre-pandemic level by the end of the year.  This is faster than expected.
• ECB expects inflation to be transitory.
• Overall ECB intends to maintain a dovish policy.
• Two good ways to judge how the markets are reacting to ECB news is to watch Euro and Italian bonds. The euro is stable rising 0.2% against the dollar.  The Italian bonds are ticking up.
• Overall the ECB decision is as expected.

Jobless Claims

Initial Claims came at 310K vs. 345K consensus.  This is the lowest level since March 14, 2020.  This indicates that the economy, even in terms of employment, is returning to pre-pandemic levels.  Powell and Biden insist on money printing and borrowing under the ruse of COVID.

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

There is speculation that China may release oil from its national reserve to lower oil prices.

API reported a draw of 2.882M barrels vs. consensus of a draw of 3.832M barrels.

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.

See also  DEPLOY CASH AND REDUCE HEDGES, POWERFUL MARKET MECHANICS AND TRUMP TARIFFS CONTROL THE STOCK MARKET

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 $1799, silver futures are at $24.30, and oil futures are $69.06.

S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400, and 4318.

DJIA futures are down 22 points.

BIG MONEY HIDING IN MEGA-CAP TECH STOCKS

September 8, 2021

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

Big Money Hiding

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

Note the following:

• The chart compares QQQ to QQQ equal weight (QQEW), S&P 500 ETF (SPY), and S&P 500 equal weight (RSP).
• The chart shows RSP has underperformed QQQ by 11.19% for the period shown on the chart.  RSP represents an average stock in the S&P 500.  QQQ is heavily weighted in mega-cap tech stocks.
• Big institutional money wants to stay in the market because the market is going up and the money managers have to meet their benchmark.  For a money manager, lagging his or her benchmark is career suicide.  The money managers who know there is high risk in this market are holding their noses and hiding in mega-cap tech stocks on the belief that the mega-cap tech stocks are safe.
• Further, the mega-cap tech stocks carry heavy weight in most broad-based ETFs.  As a result, the blind money (passive money) is heavily invested in mega-cap tech stocks without even realizing this is the case.
• The mega-cap tech stocks are now like everyone being on the same side of the boat.  Everything stays fine with the boat even though the weight in the boat is not balanced as long as there is no storm.  When a storm occurs, a boat that is not balanced tips over.

Europe Money Printing

The ECB meets on Thursday.  ECB policymaker Holzmann said that because of inflation the ECB could tighten the monetary policy sooner than expected. In response, European stocks are being lightly sold.

Momo Crowd And Smart Money In Stocks

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

Gold

The momo crowd 🔒 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 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 $1798, silver futures are at $24.30, and oil futures are $69.34.

S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400, and 4318.

DJIA futures are down 26 points.

INVESTOR OPTIMISM OVER AMERICAN BUYING BINGE FROM CHINA TEMPERED BY CONCERNS ABOUT MONEY PRINTING

September 7, 2021

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

American Buying Binge From China

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 has been moving up in a well-defined channel.
• The chart shows the stock market is at the top of the channel.
• Stock market bulls need ammunition to break above the channel.
• The ammunition has come in the form of an American buying binge from China.  Does anyone even remember that not long ago President Trump was fighting a trade war with China to reduce the continuous transfer of wealth from the U. S. to China?
• Significant optimism among investors has been created on the news that Chinese exports in August rose 25.6% year on year vs. consensus of 17.1%.  The rise in exports is primarily driven by an American buying binge from China.
• The Chinese stocks are higher on the data.
• Among investors, the optimism created by Chinese data is being tempered by concerns that the European Central Bank (ECB) will roll back its monetary stimulus.  In plain English, the better sense may prevail at ECB and they may reduce money printing.
• The stock market does not like the idea of reduced money printing as it will reduce the air that is being pumped into the stock market by central banks.

See also  THE ARORA REPORT HAS JUST POSTED AN IMPORTANT SIGNAL FOR INVESTORS

Japan Surges

The Japanese market surged 1.83% to add to a prior gain of 2.05% on the news that Prime Minister Suga will not seek re-election.

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 $1811, silver futures are at $24.44, and oil futures are at $68.11.

S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400 and 4318.

DJIA futures are down 11 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.