By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Money Flees China
Please click here for a chart of Hong Kong Large Cap ETF FXI.
Note the following:
- The world is interconnected, but don’t tell that to the momo crowd.
- Significant developments are happening overseas that will impact the U.S. stock market sooner or later. Prudent investors need to keep a close eye on these developments.
- The chart shows a significant gap down in Hong Kong stocks.
- Hong Kong stocks fell 6% to a 13 year low. This was the worst drop since the 2008 financial crisis.
- Today, foreign investors are starting a mass exodus from China. The trigger is three-fold:
- President Xi’s statement about Taiwan. Prudent investors need a deep understanding of the Taiwan situation. The podcast titled “Prudent Investors: Keep A Close Eye On China And Taiwan” is in post production.
- President Xi’s emphasis on ‘common prosperity.’ The interpretation is that the Chinese Communist Party does not want private companies to make large profits. Paradoxically, while smart money is fleeing China, the momo crowd is buying stocks of companies that generate significant profits from China such as Apple (AAPL), Tesla (TSLA), Nike (NKE), Nvidia (NVDA), and Starbucks (SBUX).
- President Xi has tightened his grip on the Chinese Communist Party. The most powerful body is the Politburo Standing Committee; it has six members. Now all six members are “yes men” to President Xi. The concern among investors is that this will make President Xi even more assertive, and there is no one to tell him when he is wrong.
- Japan became a pacifist nation after its defeat in World War II. Article 9 of the Japanese constitution renounces war as a sovereign right of the nation and the threat or use of force. Investors should note that now there is an intelligence report that Japan is considering developing counterattack capabilities to take out China’s military command and control infrastructure. This new development is waking up investors all across the globe on the dangers ahead.
- There is another significant development that is not being adequately covered in the media. Japan and Australia on Saturday executed a security agreement against the Chinese threat.
- We have previously shared with you that the four mega trends have ended that drove the 40 year long secular bull market interrupted by cyclical bear markets. The foregoing developments increase our conviction in our call. The media is oblivious and so are most investors. The Arora Report call of the four mega trends ending is a high conviction call just like our other major calls over the years that nobody was talking about when they were made but subsequently were proven spot on. Money is to be made in the future, but investors will have to behave differently. Due to the high importance of this call, a live event is scheduled for December 3. The event will include Q&A. We have already received excellent questions from hundreds of our members. If you would like your questions to be considered, register for the event and fill out the form with your questions.
- Over the weekend, there was significant bullish chatter about the stock market on social media. Most retail investors do not realize that the chatter on social media about the stock market is not organic, but engineered with bots to suck in retail investors. Many retail investors carefully study social media over the weekend, and influenced by the chatter, buy stocks on Monday morning. This is exactly what is happening this morning with aggressive buying of stocks in the early trade.
- Last week, The Arora Report call was for a short term rally, and the top band of the protection band was reduced to allow for tactical trades from the long side.
- Major earnings are ahead. These earnings will propel the market higher if they are better than expected and vice versa.
- Alphabet (GOOG) and Microsoft (MSFT) will report on Tuesday after the market close.
- Apple (AAPL) and Amazon (AMZN) will report on Thursday after the market close.
- Wall Street is positioned for earnings from these mega caps to come better than consensus.
- Positive seasonality is ahead.
- Stocks tend to run up going into the midterm election and after the election irrespective of who wins.
The Bank of Japan (BOJ) has just thrown $30B in the forex bonfire to defend the yen. In The Arora Report analysis, this intervention is not likely to succeed. In September, the BOJ spent $20B to prevent the yen from falling further. The yen is now lower than when the BOJ intervened in September. In The Arora Report analysis, BOJ’s policy is not sustainable. If and when BOJ gives up, it will have major negative implications for markets across the globe including U.S. stock and bond markets.
Tory MPs are overwhelmingly backing Rishi Sunak to become the next prime minister. This is a win for prudent fiscal policies and away from populous policies of borrowing and spending.
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 🔒 in the early trade.
The momo crowd is 🔒 in gold in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see gold and silver ratings.
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin is range bound.
Our very, very short-term early stock market indicator is 🔒 but can quickly turn 🔒. 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, and bonds are ticking up.
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 $1654, silver futures are at $19.16, and oil futures are at $83.73.
S&P 500 futures resistance levels are 3860, 3950 and 4000: support levels are 3770, 3630 and 3600.
DJIA futures are up 217 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, consider holding 🔒 in cash or treasury bills 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, the 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.
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