FED MINUTES INDICATE CAUTION IS WARRANTED BY PRUDENT INVESTORS

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

Fed Minutes

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 indicates when the Fed minutes were released.
• The Fed minutes indicate caution is warranted by prudent investors.  Here are the key points:
  • The Fed is going to follow the data.
  • At some point, the Fed may slow the pace of rate increases to allow time to assess the effects of previous increases as the data is lagging.
  • The lag in the data could result in the Fed over tightening to restore price stability.
  • The new information in the minutes is that the Fed may keep interest rates at a high level for a while to make sure that inflation returns to 2%.  Of special note is the thesis of the momo gurus is the Fed will soon start cutting rates.  This thesis of the momo gurus is behind the run up in the stock market.
  • The data does not suggest that inflation pressures are subsiding. 
• In the Morning Capsule we wrote,

Expect the momo crowd to dismiss the Fed minutes as old news, irrespective of what they say.

• The chart shows that the momo crowd bought stocks on the release of the Fed minutes.  As a matter of fact, the momo crowd started buying stocks a couple of seconds before the Fed minutes were released – so much for reading the minutes and analyzing them before buying stocks.
• The chart shows when the Treasury auction results were released.  The auction was ugly.  Normally, an ugly auction in 20 year bonds drives stocks lower, but not today. The reason is that the momo crowd was determined to buy stocks going into the Fed minutes, on the release of the Fed minutes, and after the release of the Fed minutes. Here are the details of the results:
  • $15B 20-year Treasury auction
  • High yield: 3.380% (When-Issued: 3.355%)
  • Bid-to-cover: 2.30
  • Indirect bid: 67.0%
  • Direct bid: 18.3%
• 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 green in the afternoon, indicating heavy net demand for stocks due to aggressive momo buying.

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.

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

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

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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.