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

Pay Attention

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

Note the following:

• To be successful in investing and trading, investors need to set aside their opinions and pay attention to what is happening.
• When it is all said and done, it is a question of net supply or demand for stocks.
• Reaction to news provides important indications for investors.
• The chart shows when Europe’s largest nuclear power plant was shelled by Russian forces.  A fire broke out.
• The chart shows the initial sell off.
• There are six reactors at the site and also spent fuel pools. If the integrity of the cooling system was breached, there was the potential of a disaster 10 times worse than Chernobyl.
• The chart shows that dip buyers stepped in to buy the shallow dip before there was any clarity of the situation.  This indicates that in this market, there are buyers who firmly believe that any dip is a buying opportunity and they have the resources to buy.  
• Please form your own opinion because The Arora Report’s analysis may be biased due to Nigam Arora’s significant knowledge of nuclear power plants.  As some of you know, back in the day, Nigam Arora was known as the world’s foremost authority on monitoring radiations in nuclear power plants. A company that Nigam founded had its hand in over 60% of nuclear power plants.
• The good news is that the damage was to a training building and the fire was extinguished after Russian troops captured the facility.
• The chart shows significant buying after there was clarity.
• In our analysis, clearly, Russian troops took a big risk in firing at a nuclear facility.  What if Ukrainians had fought back and the fight escalated?  What if the reactors were damaged?
• The foregoing should give pause to prudent investors and make sure that your portfolios are adequately protected. Please see the ‘Protection Bands and What To Do Now?’ section below.
• In our system, the return of capital takes precedence over the return on capital.  It is important to make money but it is more important to protect what you already have.
• The chart shows when the jobs report was released.
• The chart shows an up spike on the jobs report and subsequent give-back.
• There are two important observations from the jobs report.
  • Average hourly earnings came at 0.0% vs. 0.5% consensus. This indicates that inflation may be cooling.
  • Non-Farm Private Payrolls came at 654K vs. 390K consensus.  This also indicates that inflation may start cooling as workers are beginning to come back to the workforce.
• 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 shows that there is not a firm trend of net supply or net demand in stocks.

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 🔒 stocks in the early trade.

Gold

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

For longer-term, please see gold and silver ratings.

Oil

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

For longer-term, please see oil ratings.

Bitcoin

Smart money is 🔒 bitcoin as they realize that the general belief of bitcoin transactions being anonymous and being able to hide from governments is misplaced.

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 due to Russians attacking the nuclear plant.

The dollar is stronger due to Russians attacking the nuclear plant.

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 $1950, silver futures are at $25.40, and oil futures are $111.79.

S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.

DJIA futures are down 314 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.

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

Iran Deal

The breaking news is that Iranian journalist Reza Zandi is claiming that a nuclear deal will be signed with Iran in the next 72 hours. This is adding to buying in stocks and pull back in oil.

There is credibility to this report.

The Arora Report has recently shared with you our analysis that an Iran deal was close. The U.S. may be willing to compromise to bring down oil prices as Biden needs lower oil prices before the midterm elections.

Commodities Soar

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 compares ETF SPY to commodities ETF PDBC, NASDAQ 100 ETF QQQ, and ARK Innovation ETF ARKK.
• ARKK has been the favorite of the momo crowd.  The momo crowd was so enamored with this ETF that they were persuading their conservative parents who were holding mostly cash to go all in this ETF.
• The chart shows that PDBC is up 23.02% year to date, and ARKK is down 30.34%.
• The chart shows that SPY and QQQ are beginning to show significant up moves from the lows.
• Stock futures were lower this morning but are rocking up as of this writing for the following reasons.
  • There is a potential for a quick Iran deal.
  • Jobless claims were the lowest this year.
  • Weekly initial claims came at 215K vs. 226K consensus.  This indicates a very strong job market.
  • Russia and Ukraine are meeting again.
  • There is talk of an off ramp for Putin.
  • Stock bulls are still excited that Biden wants to borrow and spend more money.
  • Stock bulls are super excited that Powell is dovish in the face of raging inflation.
• As stocks are beginning to rocket, oil and commodities are giving up overnight gains on talk of an Iran deal and off ramp for Putin.

Momo Crowd And Smart Money In Stocks

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

Gold

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

For longer-term, please see gold and silver ratings.

Oil

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

For longer-term, please see oil ratings.

Bitcoin

Most crypto investors are under the illusion that cryptocurrencies such as bitcoin cannot be controlled by governments. This is far from the truth.  So far, many governments have chosen to not control crypto.

Bitcoin has 🔒 on the narrative that Russia will use cryptocurrencies to get around sanctions.  The Arora Report was the first to point out the flaws in the narrative.  Please see prior capsules.

The news is that the European Union is planning to take steps to make sure Russia cannot use cryptocurrencies to get around sanctions.

So far, most of the media has not picked up on the news.

Investors need to understand that the media is driven by their own agenda of maximizing viewership or readership.  The fact is that positive stories about cryptos are popular, but negative stories about cryptos have very low readership or viewership.

It is important for crypto investors to seek out independent, objective sources of research and information that is not driven by maximizing advertising revenue or making money by promoting certain cryptocurrencies.

Markets

Our very, very short-term early stock market indicator is 🔒 because the market will move based on Iran deal, the talks between Russia and Ukraine, and the potential off ramp for Putin.  Expect the market to open significantly higher.  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 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 $1930, silver futures are at $26.31, and oil futures are $109.66.

S&P 500 futures resistance levels are 4460, 4600 and 4713: support levels are 4400, 4318 and 4200.

DJIA futures are up 206 points.

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

Wrong Biden Focus

Please click here for a chart of commodities ETF (PDBC).

Note the following:

• First and foremost, we are politically agnostic. Our sole job is to help investors, investment advisors, and money managers. This post is about helping you with your investments and not about politics.
• Let us start by understanding the basics of inflation.
  • The famous economist Milton Friedman won the Nobel Prize in 1976 for his contributions to consumption analysis and to monetary history and theory.
  • Friedman established that inflation is primarily a monetary phenomenon. In plain English, whatever the cause of inflation maybe – demand or supply – it has to be financed. For higher inflation to be financed, it takes higher money supply.
  • The root cause of inflation that the economy is experiencing now is the demand caused by government policies.  Yes, there are supply disruptions, but they are only a minor part of the story.
  • The demand has been primarily the result of the following:
    • $5 trillion of money printing by the Fed
    • Federal Reserve keeping interest rates near zero
    • Rapidly expanding money supply
    • Heavy government borrowing
    • Government sending free money to consumers, such as through expanded child tax credit
    • Government policies that lead to near free money to corporations and the wealthy
• If the government would have pursued sensible policies, the supply for most goods and services, in spite of COVID, would have been enough to supply the demand and inflation would have stayed under control.
• In his State of the Union address, Biden focused on supply disruptions but ignored the root cause of higher demand.  If that was not enough, Biden wants to spend even more money.
• Biden’s lack of focus on the demand and wanting to spend more money on top of the Russian situation that may cause supply disruptions in commodities is triggering the following:
  • Commodities are flying.
  • There is buying in stocks on the prospect of more government spending.
• The chart shows that commodity ETF PDBC was on a strong uptrend before the Russian invasion.
• The chart shows that the price pattern on PDBC gave a classic technical sell signal on Russia situation.  The sell signal was generated when commodities gapped up by a large amount but then fell to close the gap and were followed by lower prices the next day.
• The chart shows that the sell signal failed on worsening Ukraine situation.
• The chart shows that as fighting in Ukraine intensified, commodities were flying even before the latest jump on Biden’s speech.
• Of note is that there are plenty of stock piles of commodities to meet the present needs.  Commodities are running up because of inflation expectations and a siege mentality that is beginning to develop.  This is exactly what happened in the 1970’s.  Ultimately the main driver of inflation becomes expectations and siege mentality.
• PBDC is in ZYX Allocation Model Portfolios.  This is the best ETF for investors that provides the appropriate balance between various commodities for investors who do not want to delve into individual stocks and individual commodities. Please see ZYX Allocation for the buy zone.

OPEC Friendly To Russia

Here are the important points.

• The most influential OPEC countries, Saudi Arabia and UAE have been historically aligned with the U.S.
• Lately, both Saudi Arabia and UAE have become closely aligned with Russia.
• OPEC+ just finished its latest meeting in a record 10 minutes.  The + indicates the inclusion of Russia.
• The expectations were that OPEC+ would increase oil production by significantly more than 400K bpd in view of Ukraine fighting.
• It appears that the close ties between Russia and Saudi Arabia, as well as UAE, prevailed and the production will be increased by only 400K bpd.

Powell

Investors are eagerly awaiting Powell’s testimony for clues to the monetary policy.

Beige Book

The Fed’s Beige Book will be released at 2 pm ET.

ADP

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

ADP came at 475K vs. 350K consensus.

Momo Crowd And Smart Money In Stocks

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

Gold

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

For longer-term, please see gold and silver ratings.

Oil

API data showed a draw of 6.1M barrels vs. a consensus of build of 2.8M barrels.

The momo crowd is 🔒 oil in the early trade.  Smart money is 🔒oil above $110 in the early trade.

For longer-term, please see oil ratings.

Bitcoin

The momo crowd continues to 🔒bitcoin on the narrative of use by Russia to get around sanctions.  Smart money is selling bitcoin as smart money understands the flaws in the narrative.  Please read yesterday’s Morning Capsule section “Flaws in Bitcoin Move Thesis.”

Markets

Our very, very short-term early stock market indicator is 🔒 as the market will move based on Powell and the Ukraine situation.  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 $1932, silver futures are at $25.24, and oil futures are $110.22.

S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.

DJIA futures are up 146 points.

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

Momo Buys Stocks

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:

• Russia is retaliating with apparent plans for heavier use of military force.
• As the news from Ukraine gets worse, momo is getting more aggressive in buying stocks.
• The thinking is that the Russian situation will make the Fed dovish.
• Early this morning, futures were down significantly. As the morning has progressed, momo buying has reduced the drop.
• The chart shows that the market is hanging near the top band of the support / resistance zone.
• The chart shows the market is hanging in above the January 24th low. January 24th low occurred on Fed fears and before the Ukraine crisis. This indicates that a large segment of market participants are buying believing the Ukraine situation is a buying opportunity.  For those interested in the next level of information, listen to the podcast titled War – Stocks, Bonds, Gold, Oil, and Bitcoin.
• President Biden’s  State of the Union speech is ahead.  The reports are that originally the speech was focused on the economy but now a call for unity on Ukraine has been added.  Often State of the Union does have some market-moving elements.

Flaws In Bitcoin Move Thesis

In yesterday’s Morning Capsule we wrote,

Bitcoin is seeing buying on the speculation that Russia will use more cryptocurrencies after the new sanctions.

Since the Morning Capsule, this narrative has taken hold and there is aggressive buying in bitcoin and other cryptos. However, the thesis behind bitcoin’s move has several serious flaws.

• The U. S. government has several ways to stop Russia from using bitcoin. It is still unknown if Biden will choose to do so.
• If the U. S. stops Russia from using cryptos, bitcoin will come crashing down.
• Russia needs to transact billions of dollars every day.  The total bitcoin market, so far, is too small to permit the kind of volume that Russia needs.
• Bitcoin trading is too thin to accommodate even a small fraction of Russian transactions.
• Most exchanges limit bitcoin – ruble pair transactions to be less than $200,000.

Momo Crowd And Smart Money In Stocks

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

Gold

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

For longer-term, please see gold and silver ratings.

Oil

A very complex OPEC+ meeting is ahead.

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

For longer-term, please see oil ratings.

Markets

Our very, very short-term early stock market indicator is 🔒 as the market will move based on news and rumors.  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 $1918, silver futures are at $24.76, and oil futures are $101.15.

S&P 500 futures resistance levels are 4400, 4460 and 4600: support levels are 4318, 4200 and 4000.

DJIA futures are down 125 points.

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

Tougher Sanctions

Please click here for a chart of  S&P 500 futures (ES_F).

Note the following:

• There was a rally in the stock market on Thursday and Friday last week on the following assumptions:
  • Sanctions on Russia were weak.
  • Russia would capture Kyiv quickly.
• Over the weekend, both assumptions turned out to be wrong.
  • Tougher sanctions were imposed including the banning of certain Russian banks from the SWIFT banking system.
  • Ukrainians have managed to hold on to Kyiv and other major cities.
• The chart shows a dramatic drop in stock futures when opened on Sunday.
• At one point Nasdaq futures were down over 3.2%.
• The chart shows that dip buyers have been stepping in and there has been steady buying.
• Russian central bank has raised its main rate to 20%.
• Russia has ordered its citizens and companies to not buy assets from foreigners.
• Sanctions are being imposed to prevent Russia’s central bank from using its foreign currency reserves.
• Putin has put Russia’s nuclear deterrence forces on alert.
• Talks are beginning between Ukraine and Russia.  If the talks are successful, expect a strong rally.
• 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 shows that there is net demand for stocks.
• Stock market bulls appear to be underestimating the risks.
• Prudent investors should consider paying attention to the protection bands.

Federal Reserve

The Federal Reserve may have to create more dollars to handle disruptions from sanctions.

In our analysis, the Fed will have a difficult time aggressively tightening the monetary policy due to the Russian situation. The stock market bulls may use this as a reason to buy stocks.

Powell will appear before the House on Wednesday and the Senate on Thursday.  This may provide hints about the change in the Fed’s position due to the Russian situation.

Momo Crowd And Smart Money In Stocks

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

Gold

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

For longer-term, please see gold and silver ratings.

Oil

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

For longer-term, please see oil ratings.

Bitcoin

Bitcoin is seeing 🔒 on the speculation that Russia will use more cryptocurrencies after the new sanctions.

Markets

Our very, very short-term early stock market indicator is 🔒as the market will depend on the news.  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 $1913, silver futures are at $24.56, and oil futures are $95.27.

S&P 500 futures resistance levels are 4318, 4400, and 4460: support levels are 4200, 4000, and 3950.

DJIA futures are down 459 points.