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.’
HERE IS HOW TO REVIEW YOUR PORTFOLIO FOR BIDEN’S 43.4% CAPITAL GAINS TAX
To gain an edge, this is what you need to know today.
43.4% Capital Gains Tax
Please click here for a chart of bitcoin.
Note the following:
- Use the following data to review your portfolio.
- The chart shows a significant fall in bitcoin on the prospects of higher capital gains tax.
- The fall in bitcoin illustrates that the more speculative an asset, the more it will be adversely affected by an increase in tax rates.
- Blue-chip stocks will be affected less than small-cap stocks.
- Value stocks will be affected less than growth stocks.
- Among growth stocks, the aggressive momo stocks may be badly affected.
- Keep in mind the following when thinking about higher cap gains tax.
- Apparently, the tax will be applicable only to those with incomes over $1 million.
- Only 0.3% of Americans make more than $1 million annually.
- The wealthy will have tools available to them to bypass the tax increases.
- The burden of the tax will fall only on those who are at the low end of the wealthy class because they do not have the tools available to bypass any higher tax.
- It is up to Congress to make the law and not up to Biden.
- The current state of our leaders in Congress is that many of them are drunk with borrowing and money printing. After all, the prevailing wisdom is that borrowing and money printing is a free lunch. Expect many politicians to see no need to raise taxes when they can just borrow and print money.
Asia And Europe PMIs
Purchasing Managers Indexes (PMI) are leading indicators and carry heavy weight in our model.
PMI for the European Union came at 63.3 vs. 62.0 consensus. This indicates expectations of strong business activity in Europe.
Manufacturing PMI in Germany came at 66.4 vs. 65.8 consensus.
Manufacturing PMI in Japan came at 53.3 vs. 53 consensus.
Manufacturing PMI in Australia came at 59.6 vs. 57 consensus.
India
India is reporting 332,730 new cases of COVID infection over the last 24 hour period. The infection is spreading at an alarming rate due to new mutations that are more contagious. The new variants are causing more breathing difficulties requiring more oxygen for patients. India is experiencing a severe shortage of oxygen.
Considering that the healthcare system is close to a breakdown and lockdowns are increasing, so far the Indian stock market is holding up remarkably well.
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 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 $1794, silver futures are at $26.41, and oil futures are $61.43.
S&P 500 futures resistance levels are 4200, 4318 and 4400: support levels are 4000, 3950 and 3860.
DJIA futures are down 29 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, 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.
A SHORT SQUEEZE EMBOLDENS MOMO CROWD
To gain an edge, this is what you need to know today.
A Short Squeeze
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- Investors need to be mindful that markets are complex. There are always cross currents.
- Yesterday morning we shared with you that there was a risk of a bull trap in tech stocks.
- Yesterday in the Afternoon Capsule we shared with you that a short squeeze was leading to a rally.
- The chart shows that the market is now above the breakout line.
- The price action shown on the chart does not mean that the risk of a bull trap has been invalidated. This risk will be invalidated only if the market moves to a new high.
- In early trade, short squeezes are occurring in several momo and meme stocks. Normally if a stock goes ballistic in a short squeeze, short-sellers step in to initiate or add to shorts. The difficulty this morning is that many of the stocks that went ballistic yesterday are ramping up again this morning but there are no shares available to borrow to go short. An example is the stock of Skillz (SKLZ), a mobile gaming platform. Yesterday the stock of SKLZ ran up 35%. The reason was that Kathy Wood started buying the shares leading to a short squeeze. She bought five million shares which is a lot for this stock. The average daily volume for this stock is 13 million. Yesterday the volume was 89 million. This morning meme investors are buying the stock aggressively because Wood bought it yesterday. Meme investors have run up the stock an additional 13% in the premarket. Normally short-sellers would step in to contain the rise but there are no shares to borrow to short sell.
Jobless Claims
Initial Jobless Claims came at 547K vs. 600K consensus. This is a leading indicator and carries heavy weight in our models.
Leading Indicators And Home Sales
The Leading Indicators and Existing Home Sales will be reported at 10:00 am ET. Both have the potential to move the markets.
Europe
ECB kept rates and money printing unchanged. This was as expected. Stocks are higher in Europe.
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 $1786, silver futures are at $26.38, and oil futures are $61.61.
S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.
DJIA futures are down 19 points.
TECH STOCKS RISK A BULL TRAP, SURPRISE CRUDE BUILD
To gain an edge, this is what you need to know today.
Potential Bull Trap
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows the breakout.
- There are a very large number of investors who buy breakouts. Such technically oriented investors bought the breakout but their buying failed to push Nasdaq much higher. This was a warning sign.
- The chart shows that the market is now below the breakout line.
- The market now needs to quickly close above the breakout line and move up to confirm the breakout.
- If the market moves lower from here, the down move may be exaggerated as the stops are taken out.
- If the market moves lower, investors who bought the breakout will be trapped.
- The down moves from failed breakouts can be very quick.
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 reported a build of 436K barrels vs. a consensus of 2.86M barrels draw. The surprise build in crude inventories is putting pressure on the price of 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 $1786, silver futures are at $26.17, and oil futures are $61.37.
S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.
DJIA futures are down 47 points.
THIS SIMPLE STRATEGY MADE 4117% PROFIT IN 2021 – TIME TO BECOME VERY CAUTIOUS
To gain an edge, this is what you need to know today.
4117% Return
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark for the stock market index (SPX).
Note the following:
- The chart compares bitcoin and dogecoin to S&P 500 in 2021.
- Some investors are patting their own backs for their genius to have made 12% by investing in S&P 500. Other investors are clearly better geniuses because they made 73% by investing in bitcoin.
- The chart shows that investors who invested in S&P 500 or bitcoin were not geniuses at all – they were very poor investors. The real geniuses were meme investors who put all their money in dogecoin – they made 4117%.
- For those of you who have not had the genius to invest in dogecoin, here is some background.
- Dogecoin was created as a joke in 2013.
- One of the touted virtues of bitcoin is that only 21 million bitcoins can be created. An infinite number of dogecoins can be created.
- Dogecoin is being promoted as the currency of the internet.
- Billy Markus sold all of his dogecoins in 2015 to buy a used Honda Civic.
- History is full of manias. These manias never end well. Prudent investors need to become extra careful when manias such as dogecoin start to become mainstream as is the case now.
- On a more pedestrian note, the meme crowd is selling stocks to buy dogecoin.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒. Smart money is 🔒.
Gold
The momo crowd is🔒. 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 $1768, silver futures are at $25.85, and oil futures are $63.81.
S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950 and 3860.
DJIA futures are down 91 points.
POTENTIAL BITCOIN LAUNDERING CRACKDOWN DAMPENING THE SENTIMENT
To gain an edge, this is what you need to know today.
Money Laundering Crackdown
Please click here for a chart of bitcoin crash (BTC).
Note the following:
- Going into the weekend, sentiment on bitcoin and other cryptos was extremely positive.
- The new direct listing of crypto exchange Coinbase (COIN) stock had added to the already extreme sentiment.
- Over the years, we have shared with you that when sentiment becomes extremely positive it is a contrary indicatory. In plain English, extreme positive sentiment is a sell signal.
- Bitcoin was vulnerable to a selloff because of extreme positive sentiment.
- The chart shows that over the weekend bitcoin crashed dropping as much as 15%.
- Bitcoin bulls stepped in to buy at the lows and have been buying fairly aggressively.
- The sentiment in bitcoin is still very positive.
- The real reason behind the crash was a report that the U. S. Treasury is about to crack down on money laundering using cryptos.
- Once bitcoin started falling, stops were taken out causing a steep drop. After the stops were taken out, bitcoin started bouncing. This pattern has repeated countless times in all assets including stocks.
- Bitcoin bulls do not want to believe that there may be a crackdown by the U. S. government as such a crackdown may be disastrous causing a substantial downside. Bitcoin bulls are promoting alternate explanations.
- There was a power outage in China’s Xinjing region. A significant amount of bitcoin is done in this region. The outage caused a significant drop in hash rate. Hash rate measures the volatility of the processing capacity of the entire bitcoin network. This explanation by bitcoin bulls is wrong because a hash rate drop slows transactions and any price drop is very temporary and not as significant as the price drop over the weekend.
- Bitcoin bulls are advancing another explanation – the central bank of Turkey banned the use of bitcoin. In the scheme of things, Turkey is a small country.
- The drop in bitcoin is dampening the bullish sentiment in the stock market this morning.
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 $1778, silver futures are at $25.92, and oil futures are $63.01.
S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.
DJIA futures are down 62 points.
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