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.’
WALL STREET PUTS BULLISH SPIN ON DISAPPOINTING EARNINGS FROM APPLE AND AMAZON
To gain an edge, this is what you need to know today.
Bullish Spin
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- Apple (AAPL) and Amazon (AMZN) are two of the most important companies in the stock market. Both reported disappointing earnings.
- AAPL‘s earnings miss is due to chip shortage. It is not clear if there is also a demand problem.
- AMZN‘s earnings miss is due to softening of online sales.
- Would you expect anything less than a bullish spin from Wall Street on these disappointing earnings? Wall Street analysts are out in full force with a positive spin on these earnings.
- The chart shows that after the breakout, QQQ did not rocket as bulls had expected.
- The chart shows that in early trading, QQQ has now pulled back just below the breakout line.
- Investors should carefully observe if the positive spin is working.
Personal Income
Personal Income came at -1.0% vs. -0.2% consensus as some government programs expired.
Consumer buying binge continues.
Personal Spending came at 0.6% vs. 0.4% consensus.
PCE Prices
PCE Prices came at 0.3% vs. 0.3% consensus.
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 🔒 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 $1781, silver futures are at $23.90, and oil futures are $81.76.
S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400, and 4318.
DJIA futures are down 78 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.
OPTIMISM OVER NEW BIDEN PLAN TRUMPS THE BAD NEWS ON THE ECONOMY
To gain an edge, this is what you need to know today.
Only 2% Growth
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:
- Q3 GDP-Adv came at 2.0% vs. 2.4% consensus. Of note is that the prior was 6.7%.
- Stock market bulls are putting a positive twist on this bad news by claiming that the economy will pick up in the fourth quarter on consumers potentially going on a buying binge for the holidays.
- Digging below the surface, concern to prudent long term investors should be that exports were down 2.5% and imports were up 6.1%. This indicates that the transfer of wealth from the United States, primarily to China, is accelerating. More worrisome is that our leaders are not paying any attention.
- The bad news on the economy is being trumped by the new Biden plan. Biden has announced a new $1.75 trillion plan. It is a far cry from the initial $3.5 trillion plan. You already know that a part of the air in this stock market is being pumped by government spending. Based on history, $1.75 trillion is still a very large sum especially since a part of it will be free money.
- The chart shows that the stock market has not rocketed after the breakout. This is disappointing many of the bulls.
- The chart shows that the market is consolidating above the breakout line and below the low band of the trend channel. As long as the market stays above the breakout line, this is a bullish pattern.
- The chart shows RSI is pulling back from an extreme level. This is consistent with consolidation in the price.
Jobless Claims
Initial Jobless Claims came at 281K vs. 291K 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 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 $1800, silver futures are at $24.07, and oil futures are at $81.80.
S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400, and 4318.
DJIA futures are up 62 points.
THE BEST DAY OF THE QUARTER TO BUY STOCKS
To gain an edge, this is what you need to know today.
The Best Day
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- Historically, October 27th is the best day to buy stocks in the fourth quarter.
- The chart shows that expectations of Nasdaq 100 (NDX) represented by ETF QQQ would have made a new high yesterday. We shared with you in the Afternoon Capsule that in spite of aggressive momo buying, QQQ failed to make a new high.
- After QQQ failed to make a new high yesterday, expectations were that it would make a new high after earnings from MSFT and GOOG. Earnings from MSFT were above the consensus and whisper numbers. Earnings from GOOG were also above whisper numbers and consensus but the momentum slowed in certain segments such as YouTube.
- So far, QQQ has not made a new high as of this writing.
- Expect a big push to run up QQQ to a new high today. In the past, many analysts would have come out talking about a potential double top in QQQ that would have been bearish. Now bears are almost extinct. Keep in mind that in early 2009, bulls were almost extinct – this was one of the reasons behind the Arora signal on March 9, 2009, to back up the truck and buy stocks at a time when almost everybody was giving sell signals. In retrospect, March 9, 2009, was the start of one of the best bull markets ever. The point is that bears are almost extinct is a sign of caution for prudent investors.
Durable Goods
Durable Goods came at -0.4% vs. -0.8% consensus.
Durable Goods Ex-transportation came at 0.4% vs. 0.5% 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🔒. Smart money is🔒.
For longer-term, please see gold and silver ratings.
Oil
API reported a build of 2.318M barrels vs. a consensus of a build of 1.65M 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.
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 $1794, silver futures are at $24.20, and oil futures are $83.52.
S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400, and 4318.
DJIA futures are up 41 points.
TECH STOCKS TRYING TO CATCH-UP WITH THE MARKET
To gain an edge, this is what you need to know today.
Playing Catch-up
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The stock market as represented by S&P 500 (SPX) is at a new high.
- The chart shows that QQQ is still below the last high.
- Expect a push to also take QQQ to a new high today.
- Will a new high in QQQ be sustained or become a bull trap? It depends on the earnings from AAPL, AMZN, MSFT, and GOOG.
- On the non-tech side, earnings are a mixed bag. Some companies are reporting good earnings because they have been able to manage the supply chain and increase prices. Other companies that have chosen not to increase prices and are experiencing supply chain issues are reporting earnings worse than the whisper numbers.
- The stock market seems to be focused on good earnings and ignoring bad earnings. This is nothing new since the momo crowd became such a force after the pandemic low.
Home Prices
Case-Shiller Home Price Index came at 19.7% vs. 20% consensus. This indicates that the rise in home prices year over year is still strong. However other recent data shows that on a month over month basis, in many markets, home prices are beginning to pull back.
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 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 $24.42, and oil futures are $84.14.
S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400, and 4318.
DJIA futures are up 102 points.
RSI AT EXTREME AHEAD OF BIG TECH EARNINGS
To gain an edge, this is what you need to know today.
RSI At Extreme
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:
- RSI is a measure of momentum. It is an oscillator that fluctuates between zero and 100.
- The chart shows that RSI has taken another leg up reaching 96.69.
- The chart shows that the last time this level was reached was in July.
- The chart shows that RSI is now higher than three prior peaks since July.
- The foregoing means that the probability has increased for the stock market to go higher between now and the year-end on a technical basis.
- Big tech earnings are ahead this week. FB reports after the close today. GOOG and MSFT report tomorrow after the close. AMZN and AAPL report Thursday after the close.
- Even though RSI has set the stage for the market to move higher, this week it will come down to the big tech earnings. Keep in mind that if earnings are less than the whisper numbers, such a high RSI makes the market vulnerable to a sharp drop.
Tesla
HTZZ is ording 100,000 cars from TSLA. The order is worth $4.2 billion. This is generating excitement in the stock market.
Trump Meme Stocks
Last week’s announcement of Trump SPAC (DWAC) has got the meme crowd excited. They are buying DWAC hand over fist. Two related stocks PHUN and BENE have become the newly minted meme stocks.
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 $1804, silver futures are at $24.54, and oil futures are at $84.89.
S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400, and 4318.
DJIA futures are up 42 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.
