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.’
MOMO BUYS ON SHOCKING JOBS REPORT
To gain an edge, this is what you need to know today.
Shocking Jobs Report
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- November Jobs Report is shocking in that only 210K jobs were created vs. 550K consensus.
- Non-farm Private Payrolls came at 235K vs. 500K consensus.
- On the positive side, the unemployment rate fell to 4.2% vs. 4.5% consensus.
- In our analysis, this data does not jive with the rest of the economic data we are seeing. There are various theories to explain this anomaly. One theory is the way the data is measured. It is likely that the data will be revised upwards.
- Historically, the momo crowd loves bad jobs reports. Their reasoning is that the worse the jobs report, the more likely the Fed is to print money and keep interest rates low.
- Today is no exception, the momo crowd is aggressively buying stocks on the bad jobs report.
- In our analysis, momo should not be so confident. The picture for the Fed has changed due to inflation.
- The chart shows a strong rally on omicron yesterday.
- The chart shows that this rally was on strong volume indicating a conviction.
- The chart shows that during the dip the market did not even touch the top support zone. This is a positive.
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 🔒. 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 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 $1770, silver futures are at $22.34, and oil futures are at $68.51.
S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.
DJIA futures are up 129 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 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, 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.
BUYING ON NO REINFECTION PROTECTION AND SLOWING iPHONE SALES
To gain an edge, this is what you need to know today.
Insanity Continues
Please click here for a chart of Apple (AAPL).
Note the following:
- The momo crowd is buying stocks on two pieces of bad news.
- A top South African scientist said that infection with other variants of Covid does not seem to protect against omicron. This observation calls into question how effective vaccines will be against omicron. So far it seems that vaccines are effective against serious illness but do not prevent mild illness from omicron. It is still early and not enough is known. We are simply providing you with the best information that there is.
- Apple is warning its suppliers that iPhone sales are slowing.
- In a sane world, these two pieces of bad news should cause selling in stocks.
- You trade the market that is and not what it should be.
- Momo is buying on the hope that the bad news will cause Powell to flip back to money printing as well as Biden to find a way to borrow more money.
- It is no secret that this stock market has run up primarily due to money printing and borrowing. This is the reason that smart money is risk-averse in this market. In contrast, both momo and meme crowds are very aggressive.
- The chart shows that Apple stock has been very strong on excitement about Apple car.
- The chart shows that in contrast to Apple, ETF SPY that represents S&P 500 has been weak.
- To give you a better picture, the chart also shows the charts of AMZN, CCL, BA, and VZ. All of these stocks have been weak.
- the main observation from the chart is that Apple due to its heavy weight in indexes has been helping indexes to levitate while there is significant weakness under the surface.
Jobless Claims
Initial Claims came at 222K vs. 255K consensus. This data is very strong. This shows that Powell’s flip is the right course. Now politicians need to also shift course and pay attention to the 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+ plans to proceed with an increase in production. This is causing oil to drop.
Oil has now dropped from a high of $88 to $63.60 as of this writing. Investors should note that at its high, major Wall Street banks were shouting from the rooftops to buy oil as they were predicting that oil was going to $125. At that time The Arora Report gave a signal to short sell oil.
The momo crowd is 🔒oil in the early trade. Note that the momo crowd was aggressively buying oil near the highs and have been mostly buying oil all the way down. Now they are selling, taking major losses.
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 $1775, silver futures are at $22.36, and oil futures are at $63.60.
S&P 500 futures resistance levels are 4713, 4770, and 4900: support levels are 4600, 4460, and 4400.
DJIA futures are up 104 points.
OVERSOLD BOUNCE, RECORD INSIDER SELLING
To gain an edge, this is what you need to know today.
Record Insider Selling
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- The chart shows that RSI was oversold and is now bouncing.
- The chart shows heavy volume on yesterday’s selling. For the longer term, the interpretation is that there is a lack of conviction in this market because the volume is higher on down days compared to up days. However, considering the magnitude of the volume shown on the chart, a very short term interpretation is that most of the weak hands have been washed out and this is bullish.
- The chart shows that during yesterday’s selloff the market did not even touch the breakout line. This is also interpreted as bullish in the very short term.
- This is the first day of the month. Blind money is pouring into Wall Street. Blind money is the money that invests irrespective of market conditions and without any analysis.
- December is a seasonally positive month.
- None of the foregoing negates the need for caution as Powell has changed his colors. This is a longer-term issue.
- Insiders are selling stocks at a record rate. For example, MSFT CEO sold one-half of his position.
Powell Testimony
Powell will be testifying in front of the House starting at 10:00 am ET. The prepared text is the same as yesterday. We will be carefully listening to Q&A to see if Powell backtracks.
Omicron
There is a report quoting WHO that omicron infections are mild. This is also helping buying in the stock market. The podcast titled Covid Variants and the Markets providing the next-level information will go live today.
ADP
ADP is the largest private payroll processor in the country. It uses its data to give a glimpse of the employment picture ahead of Friday’s all-important jobs report.
ADP Employment Change came at 534K vs. 515K consensus.
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
There is buying in oil ahead of the OPEC+ meeting.
API crude inventory showed a draw of 747K barrels vs. consensus of a draw of 1.667M barrels. This data is bearish but the anticipation of OPEC+ action is trumping the data.
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 $1791, silver futures are at $22.84, and oil futures are at $67.91.
S&P 500 futures resistance levels are 4713, 4770, and 4900: support levels are 4600, 4460, and 4400.
DJIA futures are up 316 points.
MOMO GURUS SPOOKED THAT POWELL NOT RUSHING TO HELP THEM
To gain an edge, this is what you need to know today.
Momo Gurus Spooked
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- There is a selloff going on in the early trade as momo gurus are spooked.
- The chart shows that yesterday momo crowd ran up QQQ higher than where it was before omicron news. Momo gurus decided that omicron was a good event for the stock market because it would mean more help from the Fed.
- In yesterday’s Morning Capsule, we shared with you that the reasoning of the momo crowd gurus to buy the dip could be summed up in one sentence —
stocks went up on delta, and for this reason, they will go up on omicron.
- As a counter to momo gurus’ analysis, we shared with you our analysis. Here was one of the key points:
The Fed may not want to recklessly print money as they have done in the past.
- Yesterday we shared with you that Powell would be testifying today in front of Congress. The prepared text of Powell’s testimony has been released.
- The prepared text is spooking momo gurus because Powell is not rushing to help them with money printing and liquidity like Powell did when delta came along.
- In the text, Powell admits that he has been wrong about inflation.
- Powell is now concerned about inflation. The momo gurus do not like this concern about inflation because this means less money printing.
- Yesterday early morning before the market opened, most MRNA and PFE CEOs said that current vaccines would be less effective against omicron. The market did not care and it ran up.
- This morning, the less informed in the media are saying that the market is being sold today because MRNA CEO said that the current vaccine would be less effective. This reason for the market going down this morning is obviously wrong as this was known yesterday before the market opened.
- As expected, antibody cocktails from REGN and LLY are less effective against omicron.
- We will be carefully listening to Powell Q&A. It is likely that the prepared text was finished before omicron news and the momo gurus are misreading it.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 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 $1798, silver futures are at $22.92, and oil futures are at $67.66.
S&P 500 futures resistance levels are 4713, 4770, and 4900: support levels are 4600, 4460, and 4400.
DJIA futures are down 306 points.
RECENCY BIAS AMONG INVESTORS TRUMPS FRANKENSTEIN MUTATION — POWELL TO THE RESCUE
To gain an edge, this is what you need to know today.
Recency Bias
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- The chart shows the drop on omicron mutation. This is truly a Frankenstein mutation and caused fear among investors.
- The chart shows that the volume was high during the drop even on a shortened trading day. This indicates there are a large number of investors in this market who do not have conviction in this market continuing to go up. In spite of bullishness among the momo and meme crowds, such investors sell at the first sign of trouble to safeguard their assets.
- Recency bias means investors acting based on recent events and ignoring the long history and failing to objectively analyze what may come ahead.
- Over the weekend, the meme crowd encouraged everyone to buy the dip. Their lengthy discussions come down to one sentence — stonks always go up. After all, they started investing near the bottom last year and all they have seen are stocks going up.
- The momo crowd gurus are out in full force proclaiming that the dip should be bought. Their reasoning can be summed up in one sentence — stocks went up on delta, and for this reason, they will go up on omicron.
- Nobody is talking about the following differences:
- Valuations are much higher now.
- Inflation is running much higher.
- Biden will face opposition if he tries to recklessly borrow as he has done in the past.
- The Fed may not want to recklessly print money as they have done in the past.
Powell And Yellen
The hope among investors is that Powell and Yellen will come to the rescue of the stock market. Both are testifying in front of Congress on Tuesday. The testimony will give an opportunity for politicians and both Powell and Yellen to prop up the market.
Volatility
Prudent investors need to keep in mind that not enough is known yet about omicron. It may turn out to be nothing or a big deal. Here are the positive points so far:
- There is a report from South Africa that infections are mild so far.
- MRNA says they will have a vaccine in early 2022.
- PFE says it can make a new vaccine in 95 days.
- PFE says that it has confidence that its antiviral will be effective because it does not target the spike protein.
Here are the negative points so far:
- In South Africa, omicron is out-performing delta.
- It appears that the virus started spreading in late September. The efforts to contain it may not be very successful.
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 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 $1791, silver futures are at $23.07, and oil futures are at $72.47.
S&P 500 futures resistance levels are 4713, 4770, and 4900: support levels are 4600, 4460, and 4400.
DJIA futures are up 326 points.
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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 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.
