“BUY THE NEWS” REACTION TO HAWKISH POWELL

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By Nigam Arora & Dr. Natasha Arora

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

Hawkish Powell

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:

  • In the Morning Capsule, we shared with you that there was angst about Powell’s testimony.
  • In the premarket, stocks were being sold and the VUD indicator was orange, indicating net supply of stocks.
  • The chart shows when the text of  Powell’s testimony was released.
  • The chart shows that it was a “buy the news” reaction.
  • Powell’s testimony was hawkish, but it did not matter once the buying started.
  • The chart shows that once the buying started it kept on going until the Q&A session with Powell gave investors pause.
  • 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 has been solid green, indicating net demand in the regular session.
  • The “buy the news” reaction is not limited to stocks.  Both bonds and oil are being bought.
  • In the morning, oil was being sold on recession fears.  Buying in stocks spilled into buying in oil.
  • Bonds are being aggressively bought.  This is due to very negative Wall Street positioning going into today.
  • The bond auction was not stellar. Here are the details.
    • $14B 20-year Treasury bond reopening
    • High yield: 3.488% (When-Issued: 3.486%)
    • Bid-to-cover: 2.60
    • Indirect bid: 67.4%
    • Direct bid: 20.2%
  • Normally, when the bond auction is not stellar, it leads to selling, but not today due to the positioning.
  • A deeper understanding of positioning can give you a significant edge in the market. For those interested in developing a deeper understanding and gaining an edge, listen to the podcast “Market Mechanics: Positioning To Gain An Edge.”
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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 mild 🔒.

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 🔒 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

🔒

Nibbling

🔒

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