WEEKLY STOCK MARKET DIGEST: BRAINARD AT FED WAKES UP – POTENTIAL FOR “SIGNIFICANT DECLINES” IN THE MARKET

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.’

BRAINARD AT FED WAKES UP – POTENTIAL FOR “SIGNIFICANT DECLINES” IN THE MARKET

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

Potential For Significant Declines

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

Note the following:

  • It is said ‘better late than never.’ Finally, someone at the Fed has woken up.
  • The person to wake up at the Fed is Lael Brainard.  She heads the financial stability committee.   In a report, the Fed is indicating that prices in the markets are vulnerable to ‘significant declines.’  Here are the two most relevant excerpts from the report.
    • Vulnerabilities associated with elevated risk appetite are rising.
    • The combination of stretched valuations with very high levels of corporate indebtedness bear watching because of the potential to amplify the effects of a re-pricing event
  • The jobs report unexpectedly disappointed.  April Non-farm Payrolls came at 266K vs. 1M consensus.  April Non-farm Private Payrolls came at 218 vs. 820K.
  • The chart shows a big move up in .
  • The big move up in QQQ happened right after the weak job numbers were released at 8:30 am ET.  At the same time, Dow Jones futures () turned down.
  • The reasoning behind the upmove in QQQ and a down move in Dow Jones futures is that the unexpectedly weak jobs numbers will cause the Fed to print more money or at least not taper.  This is not good for the economy but the momo crowd is going to buy tech stocks on money printing.
  • The chart shows that RSI is bouncing from the oversold line.
  • The sum total of the foregoing is that the unexpectedly weak jobs number may save the momo crowd from big losses in momo stocks.  After this number, there is a fair probability of several momo stocks taking a new leg up.

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 is moving up on the weak jobs number.

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 down and bonds are ticking up.

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 $1839, silver futures are at $27.68, and oil futures are $64.12.

S&P 500 futures resistance levels are 4318 and 4400: support levels are 4200, 4000 and 3950.

DJIA futures are down 46 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, on dips, 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, 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.

PAY ATTENTION TO PORTFOLIO CONSTRUCTION, CHINA AND AUSTRALIA TENSIONS HEIGHTEN

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

Portfolio Construction

Please click here for a chart of S&P 500 ETF () which represents the benchmark for the stock market index ().

Note the following:

  • The chart compares  to large bank ETF (), SPAC ETF (), Nasdaq 100 ETF (), and momo favorite ETF ().
  • The chart shows that the Arora sell signal for momo stocks was given one day before the top.
  • The chart shows that  has underperformed  by 42.90% so far this year.
  • The chart shows that  has underperformed KBE by 42.41% so far this year.
  • The chart shows that  has underperformed SPY by 6.28%  so far this year.
  • The chart shows the momo crowd’s favorite ARKK is down 28.7% from its high so far this year in a rip-roaring bull market.
  • Many popular momo stocks are down 40 – 90% for the year.
  • The foregoing highlights the importance of proper portfolio construction. This is the reason the Model Portfolio should be the core of your total portfolio.
  • This also illustrates the need for diversification by time frame for investors who primarily use individual stocks and not ETFs.

China Australia Tensions

Tensions between China and Australia have heightened.  Overnight China announced that it was indefinitely suspending high-level economic dialog with Australia.

Previously, Australian Defense Minister Peter Dutton stated that the possibility of a military conflict with China should not be discounted.

Jobless Claims

Weekly Initial Jobless Claims came at 498K vs. 530K consensus.  This is a leading indicator and carries heavy weight in ZYX Allocation Model.

Euro Zone

Euro Zone March Retail Sales came at 2.7% vs. 1.5% consensus.  This indicates the recovery is picking up in Europe.

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 down and bonds are ticking up.

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 $1795, silver futures are at $26.97, and oil futures are $65.38.

S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are up 42 points.

MOMO BUYS ON YELLEN WALKING BACK THE OBVIOUS

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

Yellen Walks Back

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

Note the following:

  • Yesterday, Treasury Secretary Janet Yellen said the obvious that interest rates might have to rise to prevent the economy from overheating.
  • The chart shows that investors sold in response to the statement
  • Apparently, in response to the stock market falling, Yellen has walked back her statement.
  • The momo crowd is buying in response to Yellen’s walk back.
  • The chart shows that volume was heavy on the selloff.
  • The pattern has been that the volume is heavy on selloffs and light on rallies.   This indicates a lack of conviction among the buyers.
  • The momo crowd will try to run the market above the breakout line shown on the chart.  Will they succeed?
  • Based on technicals and fundamentals, the probability of the momo crowd succeeding is about 35%.  However, there is so much liquidity that the money needs a place to go. Moreover, it is a near certainty that the Fed and government officials will do and say whatever it takes to run the market higher.  Of course, unlike the Trump era, such speech will be disguised as policy to help average Americans.

India

The Nifty Bank Index jumped 1.36% after the Reserve Bank of India (equivalent to the U. S. Fed) announced a term liquidity facility of 500 billion rupees to help health services.

Heavy Borrowing

The U. S. has dramatically increased the amount it will borrow in the next cycle to $1.3 trillion.

Dogecoin

Dogecoin which was started as a joke continues its run and now has a market cap of $86 billion.   Dogecoin has lately been the best performing asset.  This illustrates the power of the meme crowd in the market.

ADP

ADP is the largest private payroll processor in the country.  It uses its data to give a glimpse of the employment picture ahead of the official jobs report that will be released on Friday at 8:30 am ET.

ADP Employment Change came at 742K vs.  810K consensus.

ISM

ISM Non-manufacturing Index will be released at 10:00 am ET.  This has the potential to be a market-moving event.

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

API data showed a draw of 7.688M barrels vs. consensus of a draw of 2.35M barrels. This data is bullish.

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 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 $1782, silver futures are at $26.59, and oil futures are $66.25.

S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are up 95 points.

REVIEW YOUR PORTFOLIO – TAKE PARTIAL PROFITS – BREAK OUT FAILS

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

Review Your Portfolio

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

Note the following:

  • Review your portfolio.  Those who are trading oriented, consider taking partial profits based on personal preference.  Many positions have become very large due to appreciation.  Such positions should be considered for partial profit-taking.
  • Pay attention to the ‘Protection Bands and What To Do Now?’.  Make sure you are adequately protected.
  • The chart shows that the break out has failed.
  • The chart shows that last time the market fell below the break-out line, the momo crowd aggressively bought.
  • The momo crowd’s buying brought the market to the resistance level for the second time.
  • The chart shows that selling came at the resistance.  Now the break out has failed.
  • Expect momo crowd to buy the dip and attempt to run it up again.
  • The probability of the momo crowd succeeding is about 35%.

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 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 $1788, silver futures are at $27.01, and oil futures are $65.33.

S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are down 146 points.

WALL STREET FRONT RUNNING THE BLIND MONEY, ETHER AND GOLD ROCKETING

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

Blind Money

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

Note the following:

  • On the first two days of a new month, blind money pours into the market. Blind money is the money that is invested in the market without any analysis irrespective of market conditions.
  • Most of the blind money is invested in the afternoons. Wall Street knows this so they are buying now and bought on Friday.  Then they will turn around and sell it to the blind money at a profit.
  • The chart shows that in spite of blowout earnings from the likes of , and , that   is consolidating below the resistance line.
  • The fact that QQQ did not break out above the resistance line on blowout earnings is a temporary warning sign.
  • After the blind money is invested, seasonally there is weakness in the first three weeks of May.  After the weakness, investors get enthused about Memorial Day and start running up the market.
  • It is simply prudent to keep the moratorium in place temporarily to not initiate or add to long-term positions. It is perfectly fine to initiate or add to short term positions from the long side or trades from the short (sell-short)  side with good setups.
  • The moratorium will be lifted when a signal is given by the ZYX Allocation Model. Please click here to see the 10 categories of inputs that go into the ZYX Allocation Model.
  • ZYX Allocation Model is an adaptive model.  In plain English, the means that the model automatically changes with market conditions.  Please click here to see how it works.
  • The static models constitute a vast majority of the models that are out there.  The problem with static models is that they may work under one set of market conditions but they stop working as market conditions change.

Ethereum Breaks $3,000

Crypto ethereum has broken above $3,000.  The present rally was triggered by the news of the European Investment Bank potentially conducting a digital bond sale on the ethereum blockchain network.

Bulls are shooting for ether to reach $10,000.

Ether is outperforming bitcoin.

Momo Crowd And Smart Money In Stocks

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

Gold

Gold is rocketing on the news that Chinese consumption of gold went up 93.9% in the first quarter of 2021 vs. the same quarter in 2020.  Even though momo is buying gold on the news, remember that the first quarter of 2020 was a pandemic quarter in China. China is the largest consumer of 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 down and bonds are ticking up.

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 $1786, silver futures are at $26.59, and oil futures are $63.46.

S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000,3950  and 3860.

DJIA futures are up 185 points.

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.

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