WEEKLY STOCK MARKET DIGEST: JOBS REPORT SHOCKER – SPECTER OF STAGFLATION – SMART MONEY BUYS GOLD

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.’

JOBS REPORT SHOCKER – SPECTER OF STAGFLATION – SMART MONEY BUYS GOLD

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

Jobs Report Shocker

Please click here for a chart of S&P 500 ETF () which represents the benchmark stock market index S&P 500 ().

Note the following:

  • The Jobs Report is a shocker.
    • Non-farm Payrolls came at 194K vs. 450K consensus.
    • Non-farm Private Payrolls came at 317K vs. 385K consensus.
    • The unemployment rate fell to 4.8% vs. 5.1% consensus.
    • Average hourly earnings rose 0.6% vs. 0.4% consensus.
  • These numbers raise the specter of stagflation. Stagflation means inflation accompanied by low growth. Such a scenario is directly opposite of what the Fed, the government, and Wall Street have been telling investors – the prevailing wisdom is high growth and no inflation, current inflation is being justified as transient.
  • The latest bar on the chart shows that the market is confused with this shocker.
  • The momo crowd is buying stocks because weak job creation means the Fed will continue to print money and perhaps not taper as quickly and Biden will justify more borrowing. You already know that the air that has been pumping the stock market is money printing and borrowing.
  • Based on momo crowd buying, the stock market should have been running up strongly but is being restrained due to selling by non-momo investors.

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

Gold is a good hedge against the stagflation scenario.

The momo crowd is 🔒 gold in the early trade. Smart money is 🔒.

Strong buying is coming into silver.

For longer-term, please see gold and silver ratings.

Oil

It is Friday, short squeezes in oil tend to occur on Fridays.

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 🔒.  It is a Friday, short squeezes tend to happen on Fridays. If the market starts going up, short squeeze will exaggerate the move up.  On the other hand, if the market starts going down, non-momo investors will get focused on the jobs report shocker and sell. Also, the chart linked above shows that the market is in between resistance and support zones – for this reason, it is easy to push this market in either direction. 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. On the jobs report shocker, the expectation would have been for interest rates to fall and bonds to rise.  When the expected does not occur, investors need to pay attention.

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 $1778, silver futures are at $23.14, and oil futures are at $79.28.

S&P 500 futures resistance levels are 4400, 4460 and 4600: support levels are 4318, 4200 and 4000.

DJIA futures are up 21 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.

HERE IS WHY BULLS SAY THE DIP IN THE STOCK MARKET IS OVER

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

The Dip

Please click here for a chart of  S&P 500 ETF () which represents the benchmark stock market index S&P 500 ().

Note the following:

  • Here is why bulls say the dip in the stock market is over.
    • The chart shows that the support zone has held six different times.
    • In the early trade, the market is decisively above the high of the last six days.
    • The volume has been relatively high on recent up days.
    • The RSI pattern shown on the chart is typically bullish.
    • Bulls contend that a double bottom is in the process of forming. A double bottom is a bullish pattern.
  • Prudent investors are asking, “What about inflation, tapering, high valuations, extreme bullishness, and the earning season?”
  • The jobs report will be released at 8:30 am ET tomorrow morning.  The jobs report is known as the mother of all numbers because of the major impact it has on the stock market.
  • The jobs report is a lagging indicator.  It is like driving looking in the rearview mirror.  However, since investors believe in it, it works.
  • There is a sharp contrast between the patterns of the momo crowd and smart money ahead of the jobs report.
    • Momo crowd usually buys ahead of the jobs report.  The reason is that the momo crowd is mostly concerned about the rewards and they mostly ignore the risks. They tend to assume that the jobs report will be positive and the stock market will run-up.
    • Smart money tends to be very concerned about protecting wealth.  They are concerned about both the risks and the rewards.  For this reason, smart money tends to be cautious before the jobs report.

Jobless Claims

This is a leading indicator and carries heavy weight in our models.

Initial Claims came at 326K vs. 340K 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

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 $1757, silver futures are at $22.61, and oil futures are at $77.13.

S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.

DJIA futures are up 289 points.

SELLING IN STOCKS ON FEAR OF STRONG JOBS REPORT BUT MOMO BUYS

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

Fear Of Jobs Report

Please click here for a chart of  S&P 500 ETF () which represents the benchmark stock market index S&P 500 ().

Note the following:

  • The jobs report will be released on Friday at 8:30 am ET.
  • Fear of a strong jobs report started a selloff in Asia, moved to Europe, and then to the United States.
  • U. S. stock futures were much lower in the early morning. As is their pattern, the momo crowd started buying the dip aggressively lifting the market off its lows.
  • The chart shows that after a strong rally yesterday, in the premarket, the market is back again in the support zone.
  • For stock market bulls, it is critical that this support zone holds.
  • You are witnessing a battle between the momo crowd and the non-momo crowd. Those not in the momo crowd understand that the stock market has been running up primarily fueled by money printing, artificially low-interest rates engineered by the Fed, and heavy borrowing by the government. We have been writing for a while that the Fed may get itself in a box as money printing to infinity is not sustainable.
  • On the fiscal front, Biden has finally acknowledged that due to resistance from two Senators, his $3.5 trillion package is not likely to pass the Congress.  This means less borrowing by the government and less air being pumped into the stock market.
  • The momo crowd does not care or understand any of the foregoing.  They are steadfast in their belief that ‘stonks only go up.’  For this reason, they buy every dip.  The Fed has created so much liquidity that the momo crowd still has enough horsepower to keep on buying.  However if the Fed is forced to change its policies, the liquidity may start drying up and the momo crowd may not have the money to keep on buying.

ADP

ADP is the largest payroll processor in the country.  ADP uses its data to give a glimpse of the employment picture in advance of the official jobs report.

ADP came at 568K vs. 405K consensus.

Tech Stocks

Yields are rising in the early trade.  This is causing tech stocks to slide.  Thank you for all your questions to deeply understand the connection between the yields and tech stocks.  We are working on a podcast for Arora Ambassador Club members to provide you with the depth some of you desire on this subject.

39% One Day Move In Natural Gas

In the U. K., natural gas rose 39% in one day before pulling back.  This is causing increasing concerns about the energy prices in Europe if there is a cold winter.

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 pulling back after an initial rise.  Bonds are now range-bound.

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 $1761, silver futures are at $22.56, and oil futures are at $78.29.

S&P 500 futures resistance levels are 4318, 4400, and 4460: support levels are 4200, 4000, and 3950.

DJIA futures are down 224 points.

STOCK MARKET CRASHES OCCUR IN OCTOBER BUT DO NOT IGNORE BOTTOMS ALSO TEND TO FORM IN OCTOBER

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

Bottom In October

Please click here for a chart of  S&P 500 ETF () which represents the benchmark stock market index S&P 500 ().

Note the following:

  • We have previously shared with you that stock market crashes tend to occur in October.
  • There is nothing simple about the stock market. Stock market bottoms also tend to form in October.
  • November and December tend to be seasonally strong months.
  • A common scenario is for the stock market to bottom in October and then make a strong run into the year-end.
  • The chart shows that the market hit the support zone.
  • Especially tech stocks are now oversold in the very, very short term. Oversold markets tend to bounce.
  • The foregoing means that investors should not get fixated only on the downside or only on the upside. Consider staying in the protection bands and buying per the direction in the Afternoon Capsules.
  • Investors should be aware that most of the trading these days is controlled by machines.  Machines are driven by algorithms.  When the market starts going up, machines start buying and continue to buy until buying is no longer profitable.  When the market starts going down machines start short selling and continue to short sell until it is no longer profitable.
  • The effect of the machines is that the moves are exaggerated in both directions.
  • Moves on the upside are especially exaggerated because the momo crowd starts buying aggressively when the market moves up.

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+ agreed to increase the production by 400K barrels per day.  Momo crowd is buying on the news because the belief is the demand is increasing faster and some analysts had expected the production increase to be higher. However, it appears that OPEC+ may not have had the capability to increase production further.

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 $1758, silver futures are at $22.53, and oil futures are at $78.70.

S&P 500 futures resistance levels are 4318, 4400, and 4600: support levels are 4200, 4000, and 3950.

DJIA futures are up 148 points.

HERE IS YOUR PLAN FOR THE STOCK MARKET IN OCTOBER

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

The Plan

Please click here for a chart of  S&P 500 ETF () which represents the benchmark stock market index S&P 500 ().

Note the following:

  • Start with Arora’s Second Law of Investing and Trading: Nobody knows with certainty what is going to happen next in the markets.
  • Follow up with Arora’s Third Law: Making investing and trading decisions based on probabilities is the only realistic and profitable approach.
  • There is a 40% probability of the stock market breaking below the support zone shown on the chart.
  • There is a 30% probability of the stock market breaking above the resistance zone shown on the chart.
  • There is a 30% probability of the stock market staying range-bound.
  • Here are the important points about seasonality.
    • Stock market crashes tend to occur in the month of October.
    • In October 1987, the stock market lost 22% in one day.
    • The great stock market crash of 1929 started on October 24th.
    • When a crash does not occur, in the past 10 years, October has been the fourth-best month of the year.
    • Since 1950, October has ranked seventh-best month for the stock market in a post-election year.
  • The earnings season is ahead.
    • Expectations are very high.
    • Expectations for future earnings projections from companies are even higher.
    • With rising costs, companies may have difficulty meeting the expectations.
  • There is drama in Washington on a number of fronts that may move the markets.
  • Based on the data, the Fed should start tapering. However, Powell is up for renomination and he wants to keep his job. To keep his job he has to appease Biden.
  • There is considerable uncertainty about China. Chinese policies may have a significant impact on the stock market.
  • Oil prices have the potential to fluctuate wildly and may have a significant impact on the stock market.
  • There is a significant amount of economic data to be released this month and will impact the market.
  • The momo crowd is conditioned to keep on buying as their belief that ‘stonks always go up’ has not changed.
  • Here is the plan.
    • Carefully watch the price action relative to the support and resistance zones shown on the chart.
    • Follow the protection bands shown below in the ‘Protection Bands and What To Do Now?’  section.
    • Within the protection bands, pay attention to ‘Buy Zones And Buy Now Ratings’section in the Afternoon Capsule.
    • For most investors, being conservative and not aggressive at this time has merit. 
    • If you are conservative, give priority to protecting your money over making money.

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 are all kinds of rumors about OPEC+ regarding oil production.

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 $1754, silver futures are at $22.46, and oil futures are at $77.10.

S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.

 futures are down 17 points.

To take a free 30-day trial to paid services to gain access to more opportunities, please click here.

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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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