HAVE THE BULL-HEADED BULLS FINALLY GOTTEN THE MESSAGE?

Editor’s Note:

This is the Afternoon Capsule that was provided before Produce Price Index (PPI) data was released. PPI was released this morning. To see the latest on PPI, please see the Morning Capsule that is available to paying subscribers. The Morning Capsule is issued every morning before the market open.

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

Fighting The Fed

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

Note the following:

• The chart shows when retail sales data was released.  Please read the Morning Capsule for details.  Retail sales data came in hotter than expected.
• In a rational market, the stock market should have fallen on strong retail sales because it means higher interest rates for longer.
• The chart shows that in spite of strong retail sales, the stock market did not fall.  The reason is that bulls are in control.
• NAHB Housing Market Index came at 42 vs. 37 consensus.  This indicates that sentiment among home builders has turned very optimistic.  This optimism protends inflation will stay higher longer. However, for today, the data encouraged the bulls.
• When the stock market continued to levitate instead of going down, that was a signal for bulls to become more aggressive.  The chart shows the stock market took a leg up.
• The chart shows that the stock market took another leg up when the Treasury auction results were announced.  The auction was good.  Here are the results:
  • $15B 20-year Treasury bond auction
  • High yield: 3.977% (When-Issued: 3.975%)
  • Bid-to-cover: 2.54
  • Indirect bid: 75.3%
  • Direct bid: 18.0%
• 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 is mixed, indicating a continuing battle between the bulls and bears.
• Producer Price Index (PPI) and jobless claims will be released Thursday at 8:30am ET.  The momo gurus will try to spin the data as a reason to continue to buy stocks irrespective of what the data says.
• The sum total of the foregoing is that the narrative to buy stocks to fight the Fed is working even though the narrative is highly flawed. The reason the narrative is working is because the momo crowd is in control, and the momo crowd does not do much analysis of its own – the momo crowd simply follows momo gurus.

Money Flows

The momo crowd money flows since the Morning Capsule are 🔒 (To see the locked content, please take a 30 day free trial).

Smart money flows since the Morning Capsule are 🔒.

Short squeeze money flows are 🔒.

A Special Note To New Subscribers

Note the smart money behavior.  Smart money tends to sell into strength on strong up days.

New subscribers should consider adopting smart money’s way of investing and trading.

Sentiment

Sentiment is 🔒.

Sentiment is a contrary indicator at extremes.  In plain English, this means that when sentiment becomes extremely positive it is time to sell and when sentiment becomes extremely negative it is time to buy.

Close

There appear to be sell on close orders.

There is merit to watching the pattern of market on close orders as they represent the day’s dominant net cumulative activity by many professionals and funds.

Gold

The momo crowd money flows in gold are 🔒 since the Morning Capsule.

Smart money flows are 🔒 in gold since the Morning Capsule.

Oil  

EIA inventory data came at a build of 16.3M barrels vs 1.17M barrels consensus. The bearish data was cushioned by bullish news on the geopolitical front.  The U.S. apparently shot down an Iranian drone.

The momo crowd money flows in oil are 🔒 since the Morning Capsule.

Smart money flows in oil are 🔒 since the Morning Capsule.

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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.