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 What To Do Now.
CANARY IN THE COAL MINE BUT TECH STOCKS LOSE DOWNWARD MOMENTUM
To gain an edge, this is what you need to know today.
Canary In The Coal Mine
Please click here for a chart of junk bond ETF (JNK).
Note the following:
- Junk bonds are often considered the canary in the coal mine.
- In this low interest rate environment, investors are attracted to junk bonds for their high yields.
- The risk in junk bonds is that their default rates on paying back the principle goes higher when the economy worsens.
- At a time when Wall Street is certain that the economy is going gangbusters, prices of junk bonds are beginning to weaken.
- The chart shows that the junk bond ETF JNK has broken the support. This is the canary in the coal mine.
Tech Stocks
Tech stocks were high fliers in August on momo crowd buying. In September the momentum turned down. Now tech stocks are losing the downward momentum. This may be a bounce from an oversold condition or the start of a rally. Investors need to stay vigilant. We will be carefully watching.
Durable Goods
Durable Goods Orders Ex-transportation came at 0.4% vs. 1.0% consensus. We leave transportations out because they are too volatile and hinder projections.
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 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 $1,865, silver futures are at $22.85, and oil futures are $39.94.
S&P 500 futures resistance levels are 3278, 3320 and 3390: support levels are 3182, 3155 and 3124.
DJIA futures are down 122 points.
Protection Bands and What To Do Now?
It is important for investors to look ahead and not in the rear view 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, 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.
WILL THE STOCK MARKET REVISIT MARCH LOWS?
To gain an edge, this is what you need to know today.
March Lows?
Many investors are asking the probability of the stock market revisiting the March low. Let’s examine with the help of a chart.
Please click here for a chart of Dow Jones Industrial Average ETF (DIA) which represents the popular stock market index (DJIA).
Note the following:
- From the chart note the top support zone.
- The stock market has barely approached the top band of the top support zone.
- From a technical perspective, this is a normal behavior and for those who have been reading our writings and watching Arora buy zones, were expecting it.
- From a macro and fundamental perspective, the stock market is a bubble due to heavy borrowing and money printing.
- The challenge for investors is to make money from the bubble while at the same time protecting themselves. The best way to do this is to follow the directions in the ‘Protection Bands and What To Do Now?’ section below.
- Before Ginsburg’s death, the probability of the stock market touching the top band of the ‘Mother of all support zones’ shown on the chart this year was about 10%.
- Please refer to prior Morning Capsules — the probability has now gone higher. The data is not there to model the Supreme Court issue. Stay tuned.
Jobless Claims
Initial Jobless Claims came at 870K vs. 825K consensus. This indicates that the job picture is beginning to get worse. This is in line with our prior calls but is contrary to Wall Street’s calls.
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 $1,859, silver futures are at $22.16, and oil futures are $39.95.
S&P 500 futures resistance levels are 3228, 3278 and 3320: support levels are 3182, 3155 and 3124.
DJIA futures are down 137 points.
OPTIMISM ON VACCINE AND PMI LEADS TO BUYING IN STOCKS AND SELLING IN GOLD
To gain an edge, this is what you need to know today.
Optimism
Please click here for a chart of gold ETF (GLD).
Note the following:
- The chart shows that GLD ETF has broken the support.
- Gold has broken the psychological support level at $1,900. As clarification there is a difference in the price of ETF GLD and the spot price of gold.
- Selling in gold is coming due to four reasons: a short squeeze in the dollar, optimism over a vaccine, optimism over PMI and the momo crowd selling.
- Our very long term rating on gold remains positive.
- The plan is to accumulate gold and gold stocks for the very long term.
- JNJ vaccine has entered Phase 3. This is the prime reason for optimism this morning leading to buying in stocks and selling in gold.
- Bulls are buying ahead of Purchasing Managers Index (PMI) release. Bulls are very optimistic that this number will be great. The number will be released at 9:45 am ET. If the number is not great, it may lead to disappointment and selling in stocks.
- NKE reported blowout earnings and gave projections better than the consensus. NKE stock is strongly up. NKE is one of DJIA stocks and is powering DJIA higher.
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 🔒.
The momo crowd🔒in silver is especially aggressive in the early trade.
For longer term, please see gold and silver ratings.
Oil
API reported a build in crude inventories of 691K barrels vs. consensus of a draw of 2.256M barrels. However the data on gasoline was bullish. Gasoline showed a draw of 7.735M barrels vs. consensus of 614K 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 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 $1,888, silver futures are at $23.64, and oil futures are $39.90.
S&P 500 futures resistance levels are 3320, 3390 and 3420: support levels are 3278, 3228 and 3182.
DJIA futures are up 182 points.
SUPER STRONG REBOUND, POWELL AND MNUCHIN TESTIMONY
To gain an edge, this is what you need to know today.
Super Strong Rebound
Please click here for a chart of Nasdaq 100 (QQQ).
Note the following:
- This is the biggest rebound since the March 23rd low and sixth biggest rebound since 2008.
- The chart shows the resistance zone. Until the resistance zone is crossed or yesterday’s low is broken, momo stocks are in no man’s land.
- Buying was especially aggressive in momo stocks going into the close and in the aftermarket.
- Buying in momo stocks continues to be very aggressive in the premarket.
Powell And Mnuchin Testimony
Powell and Mnuchin will testify before the House financial services committee. The testimony is likely to provide no surprise but investors need to stay alert in case the Q&A session produces a surprise.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 stocks in the early trade. Smart money is 🔒.
Gold
Yesterday, gold briefly broke below $1,900. After stops were taken out by hunt and destroy algorithms, gold has rebounded.
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 $1922, silver futures are at $24.63, and oil futures are $40.01.
S&P 500 futures resistance levels are 3320, 3390 and 3420: support levels are 3278, 3228 and 3182.
DJIA futures are up 10 points.
RAISE CASH, POLITICIZATION OF JUDICIARY IS A NEGATIVE
To gain an edge, this is what you need to know today.
Raise Cash
Consider increasing cash on bounces. See ‘Protection Bands and What To Do Now?’ section below.
The Chart
Please click here for a chart of S&P 500 ETF (SPY).
Note the following:
- During the rally, the price never touched the trendline.
- There is another downward push this morning.
- The price did not stay above the breakout line for long.
Politicization Of Judiciary
After Ginsburg’s death, the judiciary in the United States may get politicized beyond an important threshold. This is a negative. Here are the key points:
- The U. S. has been able to borrow and print money without significant adverse consequences so far because the dollar is the reserve currency of the world.
- There are many factors that made the dollar the reserve currency of the world. In today’s world, where China, Russia and our own leaders are trying to dethrone the ‘King Dollar,’ politicization of judiciary will hurt the dollar. Under these circumstances, our system of government of three independent branches has given the world confidence in the dollar. Now the threshold of where our system gave the world confidence is likely to be crossed to the negative side.
- With focus on the Supreme Court, stimulus bill passage is unlikely. There are segments of our population that need help.
- If the election is disputed, politicization of the Supreme Court will make the resolution more difficult.
- The Supreme Court will hear challenge to Obamacare right after the election. The probability of the Supreme Court killing Obamacare has gone up. Obamacare has many flaws. However if Obamacare is killed, it will lead to millions of people, especially those who are sick and/or close to retirement not able to get the medical care they need and the number of medical related bankruptcies will explode.
- The focus of the election will shift from economic issues to judiciary. In the long run this is a big negative for the stock market.
- The country is already divided. The division will become more bitter sapping the strength of the U. S. as a nation.
Virus Fears
There is fear of another lockdown in the U. K. due to virus surge.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 stock 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 $1922, silver futures are at $26.12, and oil futures are $40.49.
S&P 500 futures resistance levels are 3278, 3320 and 3390: support levels are 3228, 3182 and 3155.
DJIA futures are down 574 points.
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