WEEKLY STOCK MARKET DIGEST: OCTOBER FEAR MONGERS IN THE STOCK MARKET TRAMPLED BY BLIND MONEY

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.’

BLIND MONEY FRONT RUNNERS OUTRUN OCTOBER FEAR MONGERS

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

Outrunning

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

Note the following:

  • The chart shows that the day started out in the early morning with a significant downswing in the markets.
  • The downswing was caused by the followers of the gurus who are October fear mongers.
  • There is a good reason to fear October because most of the stock market crashes have happened in October.
  • Today is the first day of the quarter.
  • On the first day of the quarter, a significant amount of blind money pours into Wall Street. Blind money is the money that investors send to Wall Street without any analysis and irrespective of market conditions.
  • The blind money typically gets invested in the afternoon.
  • Professionals front run to buy in the morning so that they can sell at higher prices to the blind money in the afternoon. After all, the blind money does not care what it pays for the stocks.
  • 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 mostly green indicating net demand for stocks.
  • The chart shows that blind money front runners have outrun October fear mongers.

Personal Income

The U. S. economy is 70% consumer-based.  For this reason, it is important to pay attention to personal income and personal spending.

Personal Income came at 0.2% vs. 0.2% consensus.

Personal Spending came at 0.8% vs. 0.7% consensus.

Bitcoin

In a few minutes, bitcoin makes the biggest run since July.

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 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 $1757, silver futures are at $22.43, and oil futures are at $74.59.

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

 futures are up 165 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.

BUYING IN STOCKS – POTENTIAL DEAL TO AVERT GOVERNMENT SHUTDOWN

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

Shutdown Likely Averted

Please click here for a chart of S&P 500 ETF () which represents the benchmark stock market index S&P 500 ().

Note the following:

  • There appears to be a deal to avert a government shutdown with a stopgap funding bill.
  • If the bill is passed it will fund the government through December 3rd.
  • The momo crowd is buying stocks on the news but there is no smart money buying.
  • The bigger issues of raising the debt ceiling, infrastructure bill, and Biden’s $3.5 trillion spending remain unresolved.
  • The chart shows that in spite of the buying in the early trade, the market remains lodged between the support zone and the resistance zone.

Jobless Claims

Initial Jobless Claims came at 362K vs. 340K consensus.

GDP

Q2 GDP – Third Estimate came at 6.6% vs. 6.7% 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 $1731, silver futures are at $21.68, and oil futures are $73.83.

S&P 500 futures resistance levels are 4400, 4600, and 4900: support levels are 4318, 4200, and 4000.

DJIA futures are up 79 points.

BUYING IN STOCKS IN EARLY TRADE AS YIELDS DROP

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

Yields Drop

Please click here for a chart of  S&P 500 ETF () which represents the benchmark stock market index S&P 500 ().

Note the following:

  • The chart shows there is buying in the stock market in the early trade.
  • The reason for the buying is a slight drop in yields.  As of this writing, the 10-year Treasury yield has dropped to 1.5220% from the high of 1.5670% reached yesterday.
  • Most of the early buying is in tech stocks that were being sold yesterday.
  • Note from the chart that the volume is higher on down days. This indicates that many large investors have one foot out of the door as they understand the high risk in this stock market. In contrast, the momo crowd is oblivious to the risks because ‘stonks always go up.’
  • The chart shows the support zone and the resistance zone.
  • The chart shows at this time the market is midway between the two zones.

Japan

Fumio Kishida will become the next prime minister of Japan.  He belongs to the establishment.  His platform is lowering the income gap by redistributing wealth.  His plan is to restrict market-oriented policies instituted by Abe that made Japan so successful.

Many good stocks are selling at relatively inexpensive valuations in Japan.  If the Japanese market drops, expect several buy signals.

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

API showed a surprise crude oil build of 4.127M barrels vs. consensus of a loss of 2.33M 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 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 $1737, silver futures are at $22.14, and oil futures are at $74.83.

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

 futures are up 94 points.

POWELL ADMITS HE WAS WRONG – OBLIVIOUS MOMO FAILS AT THE RESISTANCE

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

Powell Was Wrong

Please click here for a chart of  S&P 500 ETF () which represents the benchmark stock market index S&P 500 ().

Note the following:

  • Powell will testify before the Senate Banking Committee today.
  • In his prepared speech, Powell effectively admits the following,
    • Powell admits that he was wrong about the causes of the recent rise in inflation.
    • Powell admits that he was wrong about the length of the supply chain disruption.
    • Powell admits that he was wrong about how long the inflation would last.
    • Historically, The Arora Report now has a 100% batting average in clearly pointing out every time the Fed has been wrong well before it became obvious to most analysts.
    • This remarkable accuracy has helped The Arora Report with correct calls on the markets as the Fed policy is a major determinate of the markets.
  • Immediately after the Fed meeting, we wrote,

The VUD indicator is mixed after the Fed statement. The inference so far is that the momo crowd has simply shrugged off potential for taper in November.  The momo crowd is more focused on buying because there is no taper this time.

  • As the momo crowd bought after the Fed meeting, we wrote in bold letters,

Digging Below The Surface

When we dig below the surface, Fed’s policy going forward may not be as dovish as the momo crowd thinks. The taper may potentially be a turbo taper.

There is a potential of up to eight rate hikes by 2024.

When the Fed’s posture is changing, long term investors need to be careful. Of course in the short term, momo’s belief is intact – ‘stonks always go up.’

  • The chart shows that even though the momo crowd is oblivious and buying, the rest of the market is waking up to the change in Fed’s posture.
  • We previously gave you the resistance zone.  The chart shows that momo buying took the market to the resistance zone.
  • The chart shows that the resistance zone so far has held.
  • Yellen will also testify before the committee.  We will be carefully watching the Q&A of Powell and Yellen testimonies to see if there are any new insights. Both are likely to officially maintain their stance that inflation is temporary.

Selling In Tech Stocks

10-year Treasury yield has moved to 1.539% as of this writing.  This is causing selling in tech stocks in the premarket.

Home Prices

Case-Shiller Home Price Index shows that home prices have risen 19.9% year over year.

Momo Crowd And Smart Money In Stocks

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

Gold

Gold is being sold due to rising interest rates.

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

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

Oil

Natural gas prices in Europe are hitting an all-time high.  The surge is due to a massive supply shortage.  Natural gas prices may move higher if the weather projections for the winter are colder than normal.

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 $1728, silver futures are at $22.18, and oil futures are at $75.97.

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

 futures are down 159 points.

SELLING TECH STOCKS COMES IN AS INTEREST RATES BREACH KEY LEVEL

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

Interest Rates Rise

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

Note the following:

  • We shared with you in Friday’s Afternoon Capsule that the momo crowd was buying stocks.
  • We also shared with you the statistics related to the debt ceiling. We wrote,

There have been 14 shutdowns since 1980.

The median loss is only -0.1% on the day the budget expires. The median gain is +0.1% during the shutdown period. When the shutdown was resolved, the market went up 0.3%.

  • Over the weekend, stats related to the shutdown gained media attention.  Encouraged by the stats, momo crowd buying of Nasdaq futures on Sunday evening became fairly aggressive.  Momo crowd has a pattern of buying Nasdaq futures on Sunday evenings because of the belief that tech stocks go higher on Mondays.
  • There is some truth to tech stocks going higher on Mondays.  Tech stocks are heavily pumped on social media over the weekend.  Mom and pop follow by putting in buy orders that get executed on Monday morning.
  • The chart shows that tech stocks were moving up this morning early in the premarket when interest rates started rising.
  • As interest rates continue to creep up, big sellers have been coming into the stock market, especially selling tech stocks.
  • The chart shows a drop in tech stocks on rising interest rates.
  • The key 10-year yield has risen above 1.5% for the first time since June.
  • 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 mostly orange indicating net supply of stocks.

Durable Goods

Durable Goods rose 1.8% vs. 0.6% consensus.

Durable Goods Ex-transport rose 0.2% vs. 0.6% consensus.

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 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🔒.

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 $1754, silver futures are at $22.64, and oil futures are at $75.27.

S&P 500 futures resistance levels are 4460, 4600, and 4900: support levels are 4400, 4318, and 4200.

 futures are up 18 points.

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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.

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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