WEEKLY STOCK MARKET DIGEST: FED WANTS TO TEST 55% DROP IN THE STOCK MARKET

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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.’

DR. COPPER HITS A DECADE HIGH

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

Dr. Copper

Please click here for a chart of copper ETN ().

Note the following:

  • Copper is known as Dr. Copper because in the past it has been a good barometer of economic activity.
  • Copper is hitting a decade high.
  • The chart is of ETN  instead of copper because most investors do not have ready access to a real time copper chart and it is easier for them to follow an ETN such as .
  • There is more volume in copper index fund CPER but the data does not go back far enough.
  • ETN JJC has a tracking error like most ETNs.  Nonetheless, the chart makes the point.
  • The chart shows that copper has dramatically risen.
  • RSI shows that copper is extremely overbought.
  • Looking at the supply demand data of copper, it becomes clear that this time a large part of the move in copper is not due to robust economic activity but due to the momo crowd chasing copper.
  • For those interested in commodities, commodity ETF  is in the Model Portfolio of ZYX Global Multi-Asset Allocation.
  • The big point here is that the momo crowd buying anything that moves has distorted many indicators such as copper that investors have successfully used historically.  For this reason, it is important to use a sophisticated adaptive system such as ZYX Asset Allocation Model with inputs in 10 categories. Adaptive means a system that changes itself in response to market conditions. This is important because static systems that previously worked no longer work.  Please click here to see how ZYX Asset Allocation Model accomplishes being adaptive.

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 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 $1783, silver futures are at $27.62, and oil futures are $59.92.

S&P 500 futures resistance levels are 4000 and 4200: support levels are 3860, 3800 and 3630.

DJIA futures are up 76 points.

Protection Bands and What To Do Now?

It is important for investors to look ahead and not in the rearview mirror.

See also  WEEKLY STOCK MARKET DIGEST: MARKET BULLS STAMPEDING AS MISLEADING MOMO GURU NARRATIVE TAKES HOLD

Consider continuing to hold existing positions. Based on individual risk preference, on dips, 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, 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.

FED WANTS TO TEST 55% DROP IN THE STOCK MARKET

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

55% Drop

Please click here for a chart of   Dow Jones Industrial Average (DIA) which represents the popular index Dow Jones (DJIA).

Note the following:

  • This is a monthly chart giving investors a long term perspective.
  • Take a look at the ‘mother of support zones’ shown on the chart.
  • A 55% drop in the stock market will put the stock market in the mother of support zones.
  • We have been sharing with you the mother of support zones for a very long time.
  • The pandemic low of March 2020 touched the top band of the mother of support zones before bouncing.
  • Everyone can do analysis after the fact. This mother of support zones was provided to subscribers before the drop. This shows the power of our algorithms.
  • The news is that the Fed wants the banks to test against a 55% drop in the stock market.
  • How did the Fed pick the 55% number that coincides with the mother of support zones?
  • Perhaps the Fed is looking at the same factors that our algorithms look at.
  • The Fed would not be doing this exercise just to waste time.  As a matter of fact, since the Fed is inflating the bubble, the Fed has an incentive to not do such an exercise so as to not counter their efforts of inflating the bubble.
  • There is no need to panic at this time.  Investors should pay attention to the ‘Protection Bands and What To Do Now?’ section below.

Jobless Claims

Initial Jobless Claims came at 861K vs. 775K consensus. This is a leading indicator and carries heavy weight in our models.

Housing Starts

Housing Starts came at 1.58M vs. 1.67M consensus.  The market does not like this number because this indicates that the red hot housing market may be cooling.  However, investors should not read too much into it.  Historically January is not the strongest month for housing starts.

Building permits is a leading indicator because it all starts with building permits.  Building Permits came at 1.881M vs. 1.670M consensus.  This indicates the intention to build is very strong.

Momo Crowd And Smart Money In Stocks

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

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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 $1782, silver futures are at $27.29, and oil futures are $61.64.

S&P 500 futures resistance levels are 3920, 4000 and 4200: support levels are 3860, 3800 and 3630.

DJIA futures are down 201 points.

HOT INFLATION DATA IS HERE NOW IN THE FACE OF MOMO CROWD DISBELIEVERS

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

Bonds Breakdown

Please click here for a chart of bond ETF () breakdown

Note the following:

  • The chart shows that bonds have been in a downtrend.
  • The chart shows the breakdown in bonds.
  • RSI shown on the chart bounced from a very oversold condition above the 30 level and then fell again.  This is a negative.
  • In this case, in addition to the ETF volume, investors need to look at the volume of bonds at various different venues such as futures.
  • The chart shows the volume is high on a breakdown. This is a negative.
  • The yield on 10-year Treasuries is 1.309% as of this writing.  The stock market is ignoring it but will likely start having difficulties if the yield reaches 1.5 – 1.6%.
  • If the yield reaches 2.0%, expect a full-scale tantrum in the stock market.
  • The momo crowd has been a disbeliever.  Now inflationary data is in their faces but they still continue to disbelieve it.
  • The Fed Chair Powell is obviously a lot smarter than the momo crowd.  He recently stated that he expected inflation data to heat up but he also expected it to be transitory. His plan is to let inflation run hot.

PPI

Core Producer Price Index came at 1.2% vs. 0.2% consensus.  This is a red hot number.

Headline PPI came at 1.3% vs. 0.5% consensus.

Retail Sales

Retail Sales Ex-auto came at 5.9% vs. 0.7% consensus.  This is a red hot number.  We leave auto out because auto numbers are too volatile and hinder predictions.

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 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.

See also  TACTICAL TARGET IS S&P 500 4100-4200 – LONG WAY TO GO FOR INFLATION TO COME DOWN TO FED’S TARGET

Gold futures are at $1779, silver futures are at $27.09, and oil futures are $60.01.

S&P 500 futures resistance levels are 3920, 4000 and 4200: support levels are 3860, 3800 and 3630.

DJIA futures are down 75 points.

THE BIGGEST STOCK RUN IN 17 YEARS

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

Biggest Stock Run

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

Note the following:

  • This is now the biggest stock run in 17 years.
  • The prevailing wisdom is that the market will continue going up.
  • Hardly anyone disagrees with the prevailing wisdom.
  • The chart shows that the melt-up continues this morning.
  • Prudent investors should think of this situation in terms of a boat that is going fast and where everyone is on one side.  As long as the waters stay calm, nothing bad is going to happen by everybody being on one side of the boat.  However, if a big wave comes, there is potential for a disaster because all the weight on the boat is on one side.
  • Investors should keep an eye on RSI and volume.
  • The chart shows the volume is not high.  This is a negative.
  • The chart shows RSI is very overbought. This is a negative.
  • It is common for RSI to get this overbought in a strong run.
  • It is also common for RSI to experience only shallow short-lived pullbacks in a strong run.
  • Investors should be on the lookout for a sharp pullback in RSI as a sign that the rally may be stalling.

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 $1796, silver futures are at $27.00, and oil futures are $59.78.

S&P 500 futures resistance levels are 4000 and 4200: support levels are 3920, 3860 and 3800.

DJIA futures are up 121 points.

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