Initial jobless claims, released Thursday, soared to 3.28 million, shattering the previous record by many multiples.
My longtime readers know that initial jobless claims carry a heavy weight in my asset allocation model. The reason is that it’s a leading indicator, and the government publishes it weekly, not monthly as it does the unemployment report.
However, this time, the devastating number is already discounted in the stock market. Consider ignoring it just this time and instead focus on the secret of the rich in the stock market.
The wealthy who are successful in the stock market have an important secret that everybody can easily understand. Most investment advisers and money managers know the secret, but many have difficulty putting it into practice. Those not in the know are getting burned in this coronavirus market.
Let’s discuss this after building background with the help of a chart.
Chart
Please click here for an annotated chart of the SPDR Dow Jones Industrial Average ETF DIA which tracks the Dow Jones Industrial Average DJIA.
• This is a monthly chart to give a longer-term perspective.
• The chart shows the Arora call Jan. 22 that an external event could hurt stocks.
• After the Arora call, as the stock-buying frenzy continued, I wrote Jan. 30 that the coronavirus scare had driven dangerous greed and arrogance in the stock market.
• In response to both writings mentioned above, I received a ton of hate mail accusing me of trying to stop investors from making money; these investors were imposing their need to make money on the stock market. The stock market continued to rise and the S&P 500 SPX made a new high Feb. 19.
• The chart shows several Arora calls that dips were not buying opportunities.
• During the coronavirus drop in the stock market, many investors have been badly burned. They were making a big mistake by using the artificial construct of percentages to buy because the stock market had fallen by, say, 3% or 5%. I have written about it several times.
• The chart shows the support/resistance zone and the “mother of support zones.”
• The Arora Report call has been that the rally in the stock market has a 65% probability of eventually failing. Please see “To fearless investors gobbling up stocks: This rally has a better-than-even chance of failing.”
True nature of the stock market
The rich who are successful and active in the stock market understand the true nature of the markets. Making money in the markets is quite different from most other endeavors in life….Read more at MarketWatch.
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