BUYING OPPORTUNITY IN SOUTH AFRICA, DATA SHOWS ECONOMIC CONTRACTION, BOTH STOCK MARKET BULLS AND BEARS FRUSTRATED WITH THE PRICE ACTION

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By Nigam Arora & Dr. Natasha Arora

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

Economic Contraction

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 when PCE was reported.  PCE is the Fed’s favorite inflation gauge.  Headline PCE was better than the consensus, but Core PCE was in line with the consensus.  At the same time, weekly jobless claims, personal income, and personal spending were reported.  These numbers showed the consumers are very strong and the jobs picture remains healthy.  For details, please see the Morning Capsule.
  • The chart shows when ISM was released.  It came at 49.0% vs. 49.8% consensus. This is significant as a number under 50 indicates economic contraction.  
  • The chart shows the ISM number spurred selling in the stock market. The momo crowd aggressively bought the shallow dip.
  • Disregard that the Dow Jones Industrial Average is down over 200 points as of this writing.  Drop in DJIA is primarily due to one stock, Salesforce (CRM).  For details please see the Morning Capsule.
  • The price action shown on the chart in S&P 500 as well as in Nasdaq, not shown on the chart, is frustrating both stock market bulls and bears.  The bulls were expecting another big day as a follow through after Powell’s comments.  The reason is that momo gurus’ highly flawed narrative had taken hold.  On the other hand, stock market bears are frustrated – they were expecting a significant pullback on hopes that investors would realize momo gurus’ narrative is highly flawed.
  • 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 orange, indicating a net supply of stocks.
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South Africa

South Africa has had a corruption problem at the top.  In 2018, Cyril Ramaphosa became president with great fanfare after his victory on an anti-corruption platform.  His predecessor Jacob Zuma was forced out on corruption allegations.

Now Ramaphosa is embroiled in a scandal named Farmgate.  Cash between $500K and $5M was stolen in 2020.  South African regulations require certain declarations for tax purposes.  It appears that this money was not declared.  No police report was filed.  It appears that a bodyguard was tracking down the theft and potentially paid off certain individuals.

There are demands to impeach Ramaphosa.  The South African currency rand has plunged.  South African stocks are falling.  A further spike down in South African stocks will likely provide a buying opportunity.  The new buy zone will be in ZYX Emerging.  ZYX Emerging has continuously covered South Africa for 15 years.

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 buy on close orders.

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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

Gold is breaking out and trading above the psychological level of $1800.

Silver is seeing 🔒.

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

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

Oil

E.U. is considering a Russian oil price cap at $60.  This news is causing a pullback in oil.

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

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

Buy Zones And Buy Now Ratings

🔒

Nibbling

🔒

This post was published yesterday in The Arora Report paid services.  Since then the Morning Capsule has had an update in the paid services.

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Nigam Arora

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.

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Dr. Natasha Arora

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.

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