WEEKLY STOCK MARKET DIGEST: HOTTEST INFLATION IN A DECADE – WHAT IF FED’S MONEY PRINTING IS WRONG?

By Nigam Arora & Dr. Natasha Arora

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.’  

NO FREE MONEY DASHES BLOCKBUSTER RETAIL SALES HOPE, UPDATE ON BUY ZONES

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

Dashed Hope Is A Positive

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

Note the following:

  • The month of March saw blockbuster retail sales.
  • Retail Sales in March were driven by free stimulus checks.
  • Analysts were expecting blockbuster sales to continue in April but at a lower level than March.
  • There is a big disappointment this morning.  April Retail Sales came at 0.0% vs. 1.8% consensus.  Retail Sales Ex-auto came at -0.8% vs. 1.2% consensus.
  • The momo crowd has turned the initial disappointment into buying stocks.  The belief is that since no free money checks are about to come, there is no need for the Fed to stop money printing at the rate of $120 billion per month.
  • The biggest danger to this market is the Fed being forced to taper money printing.
  • The chart shows that the market is rallying but still below the resistance level as of this writing.
  • The chart shows that RSI has turned up.

Buy Zones

Many stocks and ETFs are in the buy zones.

Those who are super aggressive may consider starting scaling in those stocks and ETFs that are in the buy zones.

Those who are not super aggressive may consider continuing to temporarily not add or initiate new long term positions.

Today is Friday.  Traditionally many short squeezes take place on Fridays.  One of the data points that our system needs is how the market behaves after today’s potential short squeezes.

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 and 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 $1836, silver futures are at $27.42, and oil futures are $64.41.

S&P 500 futures resistance levels are 4200, 4318 and 4400: support levels are 4000, 3950 and 3860.

DJIA futures are up 140 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.

MORE BAD NEWS ON INFLATION, MUSK ATTACKS BITCOIN

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

More Bad News On Inflation

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

Note the following:

  • Previously we shared with you bad news on inflation at the consumer level.
  • Now there is bad news on inflation at the producer level.
  • Producer Price Index (PPI) came at 0.6% vs. 0.3% consensus.
  • Core PPI came at 0.7% vs. 0.4% consensus.
  • The chart shows that prior support has now become resistance.
  • The chart shows that the selloff occurred on a higher volume.  This is a negative in the short term but positive in the very, very short term.
  • The chart shows that RSI is very oversold. When RSI is this oversold, the market is prone to up spikes.
  • Earlier this morning, smart money stopped selling.
  • The momo crowd has become more aggressive in buying after the bad news.
  • Remember that the important Retail Sales data is ahead.

Initial Jobless Claims

Initial Jobless Claims came at 473K vs. 510K consensus.  This is a leading indicator and carries heavy weight in the ZYX Allocation Model.

Musk Attacks Bitcoin

Tesla () will stop accepting bitcoin for transactions.  Musk is attacking the massive electricity usage by bitcoin mining.  The estimates of the power being used in bitcoin network range from 46 TWh to 514 TWh.  Bitcoin is falling on Musk saying the obvious that has been known to all objective observers for a long time.

Of course, those with a vested interest in bitcoin make a case that bitcoin is good for the environment.

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

Colonial Pipeline has resumed operations after a cyber attack.   As a full disclosure, the trade in ZYX Short to short gasoline is now profitable.

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 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 $1817, silver futures are at $27.06, and oil futures are $64.23.

S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are up 16 points.

HOTTEST INFLATION IN A DECADE – MOMO BUYS THE BAD NEWS

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

Inflation

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

Note the following:

  • The chart shows strong rebound on momo buying.
  • The momo kept on buying throughout the decline.  The bounce occurred when smart money stopped selling.
  • Consumer Price Index (CPI) came at 0.8%  vs. 0.2% consensus.
  • Core CPI came at 0.9% vs. 0.3% consensus.
  • The Fed claims that any inflation will be transitory.  The momo crowd trusts the Fed, smart money is skeptical.
  • Markets are in total disbelief of these numbers.  In theory, gold should have been flying but it is not.  Bonds should have been falling out of bed but they are not.  Stock futures should have seen a dramatic decline but they are holding up.
  • The reason for the mild reaction appears to be momo crowd buying everything and ignoring the data.  There is simply too much liquidity in the system due to Fed policies.
  • In our analysis these numbers are real; not only that, the way the government measures CPI is flawed.  Actual inflation is higher than what the government is reporting..

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 data showed a draw in crude inventories of 2.533M barrels vs. 2.817M barrels consensus.

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 $1833, silver futures are at $27.44, and oil futures are $66.22.

S&P 500 futures resistance levels are 4200, 4318 and 4400: support levels are 4000, 3950 and 3860.

DJIA futures are down 203 points.

TECH STOCKS BREAK CRITICAL SUPPORT

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

Support Broken

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

Note the following:

  • The chart shows the support.
  • The chart shows that in the early trade in the premarket the support is broken.
  • The chart shows another support is nearby.
  • So far,  recent Arora signals to take partial profits and a moratorium on initiating new long term positions have proven spot on.
  • These spot-on calls follow the February 11th call to take profits on momo stocks.  Momo stocks peaked one day later and have been decimated since then.
  • The chart shows that RSI is now oversold.
  • Oversold RSI means that it will not take much for the market to rebound.
  • Since the momo crowd keeps on buying, as the mantra is that the dip is a great buying opportunity, all smart money will have to do is stop selling and a rally can take place.
  • Seasonally, investors get happy before Memorial Day and start buying.  Memorial Day is on May 31.  The period between now and May 26 is a high-risk period.
  • Tomorrow Consumer Price Index  (CPI) will be released at 8:30 am ET.  This number along with the Producer Price Index (PPI) to be released on May 13 and Retail Sales to be released on May 14 have the potential to primarily determine the course of the market over the next couple of weeks. 

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 $1827, silver futures are at $27.35, and oil futures are $64.27.

S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are down 331 points.

WHAT IF THE FED IS WRONG? TAKE A LOOK AT INVERSE BOND ETF TBT

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

One Way To Protect

Please click here for a chart of inverse bond ETF ().

Note the following:

  • The Fed has been telling us that the money printing and artificially low interest rates are ‘free lunches. ‘
  • The Fed has also been telling us that if its present policies turn out not to be free lunches, it has plenty of tools to force them to be free lunches.
  • Biden obviously believes that heavy borrowing on top of the large national debt without any good way of paying it back is good for the country.
  • The risks from the present-day policies are threefold.
    • Inflation will take hold.
    • The asset price bubble will burst.
    • The Fed will lose control.
  • The Fed keeps on assuring that any inflation will be transitory.
  • The Fed has a history of being wrong.
  • There are many ways to protect yourself.  One of them is inverse bond ETF .
  • TBT goes up when interest rates go up.  In theory interest rates should go up if inflation heats up.
  • In due course, TBT will likely be added to the ZYX Global Multi Asset Allocation Alert.
  • The chart shows how much TBT has fallen due to Fed policies.
  • There are some technicalities here.
    • It is a leveraged ETF with a tracking error.
    • Some of the drop in the ETF is due to the effect of interest payments.
  • The lines on the chart are a qualitative picture of how much this ETF can move. The lines should not be considered quantitative because of the reasons given above.
  • On a probability adjusted risk reward basis, TBT has merit to be used both as a hedge and as a medium to long term trade.
  • For those who want to take less risk, there is ETF  which is not leveraged.
  • There are several risks in TBT or .
    • The Fed may prove to be right.
    • Even if the Fed is wrong, the Fed may use its other tools to force the long term interest rates to stay low.
    • A geopolitical event such as a potential threat of a war with China over Taiwan.

Metals

Iron ore moved up 10% in Asian trading.  Copper is hitting new highs.  The main reason behind these moves is the concern about inflation.

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

Oil is getting support due to a shutdown of Colonial Pipeline System from a cyber attack.

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 and 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 $1841, silver futures are at $27.87, and oil futures are $65.39.

S&P 500 futures resistance levels are 4318 and 4400: support levels are 4200, 4000 and 3950.

DJIA futures are up 126 points.

Markets can generate substantial wealth for knowledgeable investors. NOW YOU TOO CAN ALSO SPECTACULARLY SUCCEED AT MEETING YOUR GOALS WITH THE HELP OF THE ARORA REPORT. You are receiving less than 2% of the content from our paid services. …TO RECEIVE REMAINING 98% INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES,
TAKE A FREE TRIAL TO 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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