SURPRISE! FED MAKES A SLIGHT TILT TOWARD SENSIBLE POLICIES

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By Nigam Arora & Dr. Natasha Arora

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

Surprise!

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

Note the following:

  • The Fed Chair Powell is clearly a very intelligent and accomplished person.
  • Members of the FOMC are excellent economists.
  • When the economy was locked down last year, the policies the Fed came up with were the right policies.
  • Subsequent to the initiation of these policies, the following new developments occurred.
    • Successful vaccines came along.
    • The economy opened up.
    • Millions of new jobs opened up.
    • House prices shot up.
    • The stock market moved into bubble territory.
    • Trump was defeated and Democrats control all three branches of the government.
    • On the fiscal side, the government is borrowing recklessly as if there is no tomorrow.
  • A big conundrum has been that the Fed got stuck and maintained the original policies ignoring the new reality.
  • Today for the first time, Powell showed a slight tilt towards sensibility.
    • Powell acknowledged that inflation is running substantially higher than the Fed’s target.
    • Powell acknowledged that the risk of inflation is to the upside.
    • Powell acknowledged that inflation may turn out to be higher and more persistent than he expects.
    • Powell acknowledged that progress has been made towards conditions to taper.
  • The chart shows when the Fed statement was released.
  • Typically momo buys after the Fed statement.
  • The chart shows that buying after the Fed statement is muted.
  • 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 chart shows that the VUD indicator is mixed after the Fed statement.  Expectations were for the VUD indicator to be solid green.
  • The explanation is that the momo feeds on excessive money printing and reckless borrowing.  Here Powell is taking a slight tilt towards sensible policies – this is bad news for the momo crowd.
  • It is said that in a bull market everybody is a genius.  Going forward, investors will need to be more judicious and also work on their knowledge and skills to continue to succeed.
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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.

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

🔒

Nibbling

🔒

Close

Orders on close appear to be matched.

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.

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

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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