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.’
COUNTER INTUITIVE: STOCK MARKET LOVES THAT NEW HIRING HAS SLOWED
To gain an edge, this is what you need to know today.
Counter Intuitive
Please click here for a chart of Dow Jones Industrial Average ETF (DIA) that represent the popular stock market index Dow Jones Industrial Average (DJIA).
Note the following:
- Serious investors ought to take a few minutes to study the chart.
- The new report shows that hiring has slowed. November Nonfarm Payrolls came at 245K vs. 650K consensus. November Nonfarm Private Payrolls came at 344K vs. 450K consensus.
- The employment numbers show a big miss.
- To those with less experience, it seems counter intuitive that the stock market is loving the fact that Americans are having a harder time finding new jobs.
- The reason the stock market is loving it is because this stock market is not about the economy and value creation.
- The chart is a monthly chart giving investors a long term perspective.
- The chart shows the rise in the Fed’s balance sheet from $0.87 trillion before the 2008 financial crisis to about $7 trillion now. In plain English, this is a fancy way to talk about money printing.
- The main reasons behind the extraordinary rise in the stock market are money printing by the Fed and excessive borrowing by the government.
- This market is controlled by the momo crowd. To the momo crowd, the worse things get such as the bad jobs numbers today, the more money the Fed will print and the more money the government will borrow.
- Some of the money that the Fed will print and the government will borrow will flow into the stock market causing the stock market bubble to get bigger.
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 up and bonds are ticking down.
The dollar is slightly 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 $1844, silver futures are at $24.22, and oil futures are $45.91.
S&P 500 futures resistance levels are 3800 and 4000: support levels are 3630, 3600 and 3520.
DJIA futures are up 97 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.
NEW DEATH RECORD — MOMO BUYS OVERBOUGHT MARKET
To gain an edge, this is what you need to know today.
Death Record
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- In the U. S., daily deaths from COVID-19 hit a new record exceeding 3,000. Bull’s battle cry has been that new records in coronavirus cases and hospitalizations did not matter because deaths were not hitting a new record.
- Stimulus hopes are running high as Democrats buy into a plan by some Republicans to spend about $1 trillion. Previously Democrats were stuck on spending more than $2 trillion.
- QQQ has become a proxy for the momo crowd.
- The chart shows that QQQ is tracing a positive pattern. Such patterns tend to breakout to the upside.
- If QQQ breaks out, it will lead to another leg up in popular stocks such as Apple (AAPL), Amazon (AMZN), Google (GOOG), Microsoft (MSFT) and Facebook (FB).
- The chart shows a questionable breakout so far.
- The chart shows that RSI is overbought. In the short term, overbought markets are vulnerable to the downside.
- The sum total of the foregoing is that any pullback should be bought as long as the momo crowd persists in its behavior to fearlessly buy without analysis based on media pumps.
Jobless Claims
Initial Jobless Claims fall to 712K vs. 775K consensus. This number shows that even in the face of rising coronavirus cases, fewer people are losing jobs.
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
OPEC and Russia are meeting today. The consensus is that they will reach an agreement to extend the production cuts to March. If they fail to reach an agreement, oil can easily fall $4 to $5.
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 $1839, silver futures are at $23.96, and oil futures are $45.14
S&P 500 futures resistance levels are 3800 and 4000: support levels are 3630, 3600 and 3520.
DJIA futures are up 23 points.
AN IMPORTANT CHART THAT ALL INVESTORS SHOULD WATCH BUT ARE NOT WATCHING, UN RECLASSIFIES MARIJUANA
To gain an edge, this is what you need to know today.
Vaccine Approved
The U. K. has approved PFE and BNTX vaccine for coronavirus.
An Important Chart
Please click here for a chart of 7-10 year bond ETF (IEF).
Note the following:
- This is an important chart that all stock investors should watch but are not watching.
- One of the important reasons that investors beyond the momo crowd have rushed into buying stocks is TINA (There is no alternative.) Many investors, especially retirees, feel that they are forced to take high risks by moving their money into the stock market because they cannot get any reasonable return on their safer fixed-income investments such as CDs due to the policies of the Fed and the government that discourage savings and encourage borrowing.
- The artificially low interest rates engineered by the Fed have also led to higher PEs for stocks.
- Bonds move inverse to interest rates. In plain English, when interest rates rise, bonds fall.
- The chart shows that 10-year Treasury bonds are in a downtrend.
- The chart shows the key support level for bonds.
- If the key support level is broken, at first stock investors will buy stocks with proclamations that the economy is better. However, if interest rates keep on rising, some of the high flying tech stocks will lose steam because the present value of the future cash flow will become lower.
- The most common question we are asked, “What will cause the stock market bubble to burst?” The answer is that if the Fed loses control of the market, the bubble will burst.
- One of the early indications of the Fed losing control will show up in a bond chart.
Marijuana Reclassification
The UN has reclassified marijuana. Marijuana has been removed from Schedule IV of the 1961 Single Convention on Narcotic Drugs.
Updates are coming to the Model Marijuana Portfolio.
ADP
ADP is the largest private payroll processor in the country. ADP uses its data to give an advanced glimpse of the ‘mother of all numbers’, the jobs report, that will be released on Friday at 8:30 am ET.
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 an inventory build of 4.146M barrels vs. consensus of 2.36M barrels.
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 slightly 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 $1822, silver futures are at $23.85, and oil futures are $44.50.
S&P 500 futures resistance levels are 3800 and 4000: support levels are 3630, 3600 and 3520.
DJIA futures are down 126 points.
MOMO BUYS ON POWELL SAYING CHALLENGING MONTHS AHEAD
To gain an edge, this is what you need to know today.
Challenging Months Ahead
Please click here for a chart of S&P 500 ETF (SPY) which represents benchmark stock market index (SPX).
Note the following:
- In prepared remarks, the Fed Chair Powell is cautioning that a challenging few months are ahead for the U. S. economy. This is due to the slowing economy and the spreading virus.
- The momo crowd is aggressively buying stocks on Powell’s statement.
- The momo crowd loves excessive money printing and excessive borrowing. The worse the virus gets and the slower the economy, the Fed will print more money and the government will borrow more money. A big part of this money flows into the stock market.
- Forget about doing something about the long-term negative consequences of excessive money printing and excessive borrowing, our politicians don’t even talk about it.
- The chart shows that the S&P 500 is breaking above the vaccine high. This is a positive.
- The charts for Dow Jones Industrial Average (DJIA) and Nasdaq 100 ETF (QQQ) are not as positive.
- The chart shows a negative RSI divergence. In plain English, this means that as the price is going up, the momentum is going down. This is a negative.
First Of The Month
Today is the first day of the month. Blind money pours into Wall Street on the first two days of the month. Traders are front running as money managers will be buying stocks to invest the new blind money later today and tomorrow.
PMI
The final Purchasing Managers Index (PMI) data will be released at 9:45 am ET. Sometimes this is market-moving data.
Germany
Germany’s PMI came at 57.8 vs. 57.9 consensus.
China
China’s factory activity accelerated at the highest rate in a decade. Manufacturing PMI came at 54.9 vs. 53.5 consensus.
Copper
Copper is hitting an eight-year high on the China data.
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
OPEC decision has been postponed to Thursday.
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 $1816, silver futures are at $23.74, and oil futures are $45.06.
S&P 500 futures resistance levels are 3800 and 4000: support levels are 3630, 3600 and 3520.
DJIA futures are up 313 points.
GOOD NEWS ON VACCINE DOES NOT RUN UP THE STOCK MARKET — REACTION TO THE NEWS IS A ‘TELL’
To gain an edge, this is what you need to know today.
The Tell
Please click here for a chart of volatility ETF (VXX).
Note the following:
- On every recent Monday, there has been good news on vaccines. Today is no exception.
- Moderna (MRNA) intends to seek U. S. and EU approval for its vaccine.
- We have been sharing with you that the reaction to the news is always an important ‘tell.’
- The momo crowd aggressively bought on the news as is their pattern but other segments of the market have been selling the news.
- The foregoing is very different from recent prior Mondays.
- As shown on the chart, volatility ETF VXX went up dramatically when the stock market dipped in March.
- Volatility ETF goes up when investors expect the market to go down. The chart shows that even when the virus had become a big issue in February and March, volatility was not going up as investors believed that the stock market only went up.
- You may recall that in January The Arora Report was warning that the market would drop due to the virus. That call was proven spot on.
- The line on the chart shows where VXX was before the market drop in March.
- The chart shows that VXX has collapsed from recent highs but still is significantly above the March lows.
- VXX has a built-in natural decay.
- The foregoing shows that even though sentiment is very positive and the prevailing wisdom on Wall Street is that the market is going to go up, many investors still remain worried and are protecting their portfolios with VXX.
- The chart shows that today on the vaccine news, VXX is slightly higher. This is contrary to what would have been expected. This indicates that for the time being, the vaccine news may have been fully discounted in the market.
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. The mom crowd is moving out of gold and into bitcoin.
Smart money is 🔒.
For longer-term, please see gold and silver ratings.
Oil
In a pre-meeting, OPEC ministers failed to agree on production cuts. The main meeting starts today.
The momo crowd is🔒 based on numerous rumors that keep on floating regarding OPEC and Russia. 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 $1776, silver futures are at $22.19, and oil futures are $45.50.
S&P 500 futures resistance levels are 3630, 3800 and 4000: support levels are 3600, 3520 and 3460.
DJIA futures are down 178 points.
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