WEEKLY STOCK MARKET DIGEST: PAY ATTENTION: STOCK MARKET FINALLY PRICING IN A MAJOR CHANGE

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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.’

TAKE A CLUE FROM POWELL AND BIDEN – PREPARE NOW TO PROSPER IN THE NEW ERA

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

Long Term Perspective

Please click here for a 46 year chart of the 30-year U.S. Treasury yield.

Note the following:

  • Pay attention to the trendline on the chart.
  • The chart shows that the 40 year bull market in bonds is over.
  • Last year, The Arora Report made a major call. The prior similar major call by The Arora Report was in 2009.  That call was to back up the truck and aggressively buy stocks.  The 2009 call was made at the time of the great financial crash when S&P 500 had lost half of its value and  most portfolios had lost 70% – 90% of their value.  Most Wall Street strategists were issuing sell signals.  Hindsight shows that the 2009 Arora call was spot on, as the call was made at the exact bottom before the start of a great bull market.
  • The Arora call made in 2022 was that the 40 year secular bull market in stocks had ended due to four megatrends ending.  To help our members shift their thinking to prosper in the new era, for the first time since 2009 a special live event was held titled “A Forward Look At Investing 2023 – 2030.”  If you missed the event, a recording is available in Arora Ambassador Club.
  • Yesterday, 11 months after the Arora call on the four megatrends ending, Fed Chair Powell and President Biden confirmed that two of the megatrends have ended.
  • Powell confirmed that the deflationary era had ended, resulting in the end of the long bond bull market.
    • One of the four megatrends behind the Arora call was the end of the 40 year bond bull market.
  • Biden spoke to the nation and proposed spending $100B for Ukraine, Israel, Taiwan, and the southern border.
    • One of the four megatrends behind the Arora call was the end of the peace dividend since the Berlin Wall fell and the end of the Soviet Union.
  • The road ahead will be different from the road behind.  To prosper in the new era, it is extremely important for investors, investment advisors, and money managers to not be stuck in the thinking that was appropriate for the 40 year secular bull market era.  If you stick with the old thinking, not only will you miss out on prospering but you will lose money. 
  • In the present new era, you can make more money than you could in the 40 year secular bull market.  To make money in this era, the first mental shift you need to make is that volatility is your friend.  You simply need to learn how to use it to your advantage.  
  • By shifting your thinking now, you also gain an edge over Wall Street that is still stuck in the old thinking.  You cannot blame Wall Street, because human nature as it is, it is very hard for institutions to change.  Think of an analyst who got a job on Wall Street when he came out of college at 22 years old.  Now he is 62 years old.  In his 40 year career, all he saw was a secular bull market.
  • Setting aside the foregoing long term perspective, for the day, institutions are hedging ahead of the weekend risk of a potential event in the Middle East.
    • A U.S. warship intercepted missiles fired from Yemen by Iran backed militias towards Israel.
    • There is risk of wider escalation.
    • Institutions are also concerned about spending another $100B on wars at a time when national debt is over $33T and there are large budgetary deficits.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Microsoft (MSFT) and Meta (META).

In the early trade, money flows are negative in Nvidia (NVDA), Tesla (TSLA), Apple (AAPL), Amazon (AMZN), and Alphabet (GOOG).

In the early trade, money flows are negative in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).

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 *** stocks in the early trade.

Gold

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

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

Oil

The momo crowd is *** oil in the early trade.  Smart money is *** oil in the early trade.

For longer-term, please see oil ratings.

Bitcoin

We have previously shared with you that a spot bitcoin ETF can add $1T to bitcoin market cap.  Crypto investors are excited and aggressively buying bitcoin (BTC.USD).

Markets

Our very, very short-term early stock market indicator is ***, but keep in mind that it is a Friday.  Short squeezes tend to start on Fridays.  If a short squeeze starts, the indicator will turn positive.  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 range bound.

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 $1989, silver futures are at $23.29, and oil futures are at $89.26.

S&P 500 futures are trading at 4288  as of this writing.  S&P 500 futures resistance levels are 4318, 4400, and 4460: support levels are 4200, 4000, and 3950.

DJIA futures are down 88 points.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding *** in cash or Treasury bills 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.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.  Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

 

TESLA HURT BY INTEREST RATES, BUYING OPPORTUNITY IN SEMICONDUCTORS, IMPORTANT POWELL SPEECH AHEAD

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

Opportunity In Semiconductors

Please click here for a chart of Tesla stock (TSLA).

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of TSLA is being used to illustrate the point.
  • TSLA is a very important stock because it is part of the magnificent seven.
  • The chart shows a big drop in TSLA stock on earnings.
  • The trendline on the chart shows that TSLA stock is in a downtrend.
  • Tesla has a good story in Cybertruck, FSD, lower cost than competitors, and energy business.  However, Tesla has been hurt by rising interest rates.  In the conference call, Musk mentioned interest rates 11 times.
  • In The Arora Report analysis, there is a readthrough for the economy from Tesla earnings.  After tax credits, Tesla cars are some of the cheapest cars in the U.S. now.  Under certain circumstances, after tax credits, a consumer can now buy a brand new Model 3 for $24,000 in California.  In spite of this advantage, Tesla is having difficulty.  This indicates that although consumer spending continues to be strong, the consumer is pulling back on high ticket purchases.
  • There is good news from Taiwan Semiconductor (TSM). Taiwan Semiconductor  is important because it is the largest semiconductor foundry for advanced chips, including the CPU in your iPhone. Taiwan Semiconductor profits fell by 25%.  However, this is better than the consensus.  For the year ahead, TSM is predicting a drop in industry inventory levels.  When inventories go down, that is typically the bottom of the semiconductor cycle.  Historically, it pays to buy semiconductors when the cycle is bottoming.   Two ETFs, artificial intelligence ETF (AIQ) and semiconductor ETF (SMH), are of special interest in the ZYX Allocation Model Portfolio.  The portfolio is very overweight in semiconductors.  Together, these two ETFs can have an allocation up to 23%.  Investors need to keep in mind that there is no free lunch.  Semiconductors have a high beta.  In plain English, this means that they move a lot more than the market – to the upside and to the downside.  
  • Fed Chair Powell is speaking at the New York Economic Club at 12pm ET.  We will be carefully watching for clues regarding the monetary policy.  The consensus is that Powell will be dovish.  If Powell turns out to be dovish, expect the stock market to spike up.  On the other hand, if Powell is hawkish, there could be significant downside from here.
  • Prudent investors need to keep a close watch on 10-year Treasury yields.  They are trading at 4.925% as of this writing, close to the highest level since 2007.
  • Mortgage rates have now hit 8%.
  • Initial jobless claims came at 198K vs. 210K consensus. This indicates the job picture continues to be very strong.  Jobless claims are a leading indicator and carry heavy weight in our adaptive ZYX Asset Allocation Model with inputs in ten categories.  In plain English, adaptiveness means that the model changes itself with market conditions.  Please click here to see how this is achieved.  One of the reasons behind The Arora Report’s unrivaled performance in both bull and bear markets is the adaptiveness of the model.  Most models on Wall Street are static.  They work for a while and then stop working when market conditions change.
  • The jobs picture is the strongest at the low end, but it continues to be weak in certain sectors such as information technology.  As an example, Nokia (NOK) is laying off 14,000 employees.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.
See also  STOCK MARKET CELEBRATES COOLER CPI, OIL GLUT BY THE END OF THE DECADE

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), and Meta (META).

In the early trade, money flows are neutral in Apple (AAPL).

In the early trade, money flows are negative in Tesla (TSLA).

In the early trade, money flows are mixed in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

The momo crowd is *** stocks in the early trade.  Smart money is *** in the early trade.

Gold

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

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

Oil

The Biden administration is loosening restrictions on Venezuela to allow more Venezuelan oil on the market.  This is causing a drop in oil. 

The momo crowd is *** oil in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) continues to levitate on enthusiasm about a potential spot bitcoin ETF.

Markets

Our very, very short-term early stock market indicator will depend on what Powell says.  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 $1967, silver futures are at $23.02, and oil futures are at $86.52.

S&P 500 futures are trading at 4350 as of this writing.  S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.

DJIA futures are up 19 points.

 

MONEY RUSHING INTO SAFE HAVENS AS WALL STREET’S CALLOUS CALCULATION BLOWS UP

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

Market Mechanics

Please click here for a chart of West Texas Intermediate crude oil futures (CL_F).

Note the following:

  • The chart shows that oil is jumping after a blast at a hospital in Gaza killed a large number of civilians.
  • Iran is calling for an oil embargo against Israel.
  • In The Arora Report analysis, given the presence of two US aircraft carrier groups near Israel, there is no chance of a potential oil embargo succeeding. 
  • Iran is also calling for Islamic countries to sanction Israel.
  • Arab leaders have canceled President Biden’s Jordan summit in reaction to the blast at the hospital in Gaza.
  • In The Arora report analysis, even though Arab countries such as Egypt and Jordan are dependent on US financial aid, and Gulf countries are dependent on the US for security, Arab leaders do not want to appear to be cooperating with Biden.  The reason is that Arab leaders are afraid of unrest in their own countries and losing power.  The outrage among their own populations over the hospital blast and continued bombardment of Gaza is approaching a boiling point.
  • Prudent investors should pay attention to political instability that may develop if the carnage in Gaza continues and there is no humanitarian relief for innocent people who are running out of food and water.  In The Arora Report analysis, if political instability develops, oil prices will jump.
  • For investors, it is important to note that the hospital blast has blown Wall Street’s callous calculation.  It is Wall Street’s callous calculation along with market mechanics that are responsible for the recent rise in the market.  Please read prior Capsules regarding Wall Street’s callous calculation.
  • Money is moving into safe havens of gold and Treasury bonds.  In spite of money rushing into Treasuries, bonds are still falling due to the Bank of Japan speculation.  Please scroll down to the Japan section.
  • For the new members, gold ETF (GLD) and its buy zone are in the Model Portfolios in ZYX Allocation.  Silver ETF (SLV) and gold miner Newmont (NEM) are in the Core Model Portfolio in ZYX Buy.
  • Even though Wall Street’s callous calculation is blown, powerful market mechanics are still in place attempting to drive the stock market higher.  To learn about the market mechanics that are in play right now listen to these two specific podcasts in Arora Ambassador Club.
    • MARKET MECHANICS: POSITIONING
    • MARKET MECHANICS: GAIN AN EDGE FROM YEAR END CHASE
  • US sanctions on the export of AI technology and chips to China are beginning to have an impact.  The Dutch company, ASML (ASML) is a bellwether and is the dominant supplier of ultra lithography machines that are needed for advanced chips.  ASML is warning of a flat 2024 and headwinds ahead due to US sanctions on China.  Please see prior Capsules regarding details of US sanctions on China.
  • Fed’s Beige Book will be released at 2pm ET.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.
See also  GROWTH FEARS SEEPING INTO THE STOCK MARKET – NVIDIA’S RUBIN AND RATE CUT HOPE HELP THE STOCK MARKET

Housing

Due to most homeowners having locked in lower interest mortgages, there is very little supply of existing homes for sale.  For this reason, the business of new home builders is booming.  The new home activity is slowing.  Here is the new data.

  • Housing starts came at 1.358M vs 1.380M consensus
  • Building permits came at 1.473M vs 1.448M consensus

China

The Chinese economy is doing better than expected.  Here are the details of the new data:

  • Q3 GDP came at 1.3% quarter over quarter vs 1.0% consensus
  • Industrial production came at 4.5% year over year vs 4.3% consensus
  • Retail sales came at 5.5% year over year vs 4.9% consensus

Japan

In The Arora Report analysis, even investors who do not like to think beyond the US, need to pay close attention to the Bank of Japan (BoJ).  The reason is that the BoJ’s policy is about to shift and it will have a major impact on the US stock and bond markets.  We have previously shared with you the reasoning behind the importance of paying attention to the BoJ.

In The Arora Report analysis, part of the recent rising yields that have impacted the stock market is due to speculation about the BoJ’s future actions.

The BoJ conducted an unscheduled bond buying operation.

Rumors are that the BoJ will raise its inflation forecast for FY23 to 3.0%.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Microsoft (MSFT).

In the early trade, money flows are negative in Amazon (AMZN), Nvidia (NVDA), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).

In the early trade, money flows are negative in S&P 500 ETF (SPY) and negative in Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

The momo crowd is *** stocks in the early trade.  Smart money is *** stocks in the early trade.

Gold

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

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

Oil

The momo crowd is *** oil in the early trade.  Smart money is *** oil in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Estimates are that the approval of a bitcoin (BTC.USD) ETF may add $1T to bitcoin market cap.  This speculation is bringing in buying in bitcoin.

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 $1961, silver futures are at $23.34, and oil futures are at $86.59.

S&P 500 futures are trading at 4380 as of this writing.  S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.

DJIA futures are down 49 points.

 

IRAN WARNING STOPS THE MARKET RALLY BUT HISTORIC BIDEN VISIT TO ISRAEL IS A POSITIVE FOR THE MARKET

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

Consumer Spending Binge

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 a big rally in the stock market yesterday.  The rally was triggered by callous calculation by Wall Street.  Please read yesterday’s Morning Capsule to learn more about the callous calculation.
  • The chart shows that RSI has quickly become overbought.  Even though overbought markets are vulnerable to a pull back, in the complete context of volume and price action, this quick move up in RSI is a positive for the market.
  • The chart shows that the market is consolidating above the top band of the top band of the support zone.  This is a sign of technical strength.  The primary reason behind the strength is the two market mechanics.
    • The market mechanic of positioning is to the upside.
    • The market mechanic of year end chase is to the upside.
  • Market mechanics are powerful.  About two-thirds of the market rise this year is due to market mechanics.  Understanding market mechanics can give you a big edge.  Due to their high value, most of the knowledge about market mechanics is kept close to the chest of Wall Street professionals.  The best way to learn about market mechanics is to listen to the podcast in Arora Ambassador Club.
  • The new data on consumer spending is unexpectedly strong.  The US economy is 70% consumer based, therefore prudent investors pay attention to retail sales. Here are details of the new data:
    • Headline retail sales came in at 0.7% vs 0.3% consensus. 
    • Retail sales ex-auto came in at 0.6% vs 0.2% consensus.
  • In The Arora Report analysis, the reason retail sales continue to stay strong is due to the free money distributed by the Federal government through a number of programs during the pandemic.  Now even though the headlines of free money have faded, the money that the Federal government borrowed and spent is still in the system. Further there is unprecedented spending by the Federal government under the Inflation Reduction Act and Infrastructure Act.  The money from these two acts will continue to flow for years.  Wealthy consumers still have significant savings, low end, and middle class consumers are borrowing more and charging more to their credit cards.  Since consumers got into the habit of spending more, they are not likely to change that behavior until the money in the system starts drying up.
  • Yields are rising after the release of retail sales data.
  • Yesterday in the Morning Capsule we shared with you that the Biden Administration was tightening restrictions against China.  It should have impacted many stocks such as Nvidia (NVDA) but it did not as investors aggressively bought on Wall Street’s callous calculation.  In the Afternoon Capsule we wrote:
  • Investors are back in the mode of bad news is good news.  Periodically the market gets in the mode of investors buying any stock that has news, good or bad.  Today is one of those days.  Investors are aggressively buying any company with news.

  • Today investors are noticing the new restrictions and they are selling stocks such as NVDA in early trade.  It is not uncommon for markets to have delayed reactions especially when investors get in the euphoria mode like they did yesterday.
  • President Biden, in a historic first, will be visiting Israel tomorrow.  This is the first visit ever by a US president to Israel in wartime.  Here are the key points of Biden’s visit:
    • The purpose of Biden’s visit is to show complete solidarity with Israel.
    • Biden’s visit is designed to deter Iran and Hezbollah from opening a northern front in Israel.
    • There are reports that Biden has reached a deal with Israel Prime Minister Netanyahu to provide help to Palestinians in the Gaza Strip.
    • To help with humanitarian aid and to contain the conflict Biden will also be visiting Jordan.  In Jordan, he will meet with the Egyptian President Abdel Fateah El-Sisi and the Palestinian President Mahmoud Abbas.
  • In The Arora Report analysis, prudent investors need to keep a close eye on the new warning from Iran of a potential preemptive action against Israel.
    • Hezbollah and Israel have been engaged in firing at each other raising tensions.
    • The warning from Iran has stopped the stock market rally in its tracks.
    • To reduce risk, many institutions seem to be selling on this warning.
  • In The Arora Report analysis, among the earnings released this morning so far, Bank of America (BAC) earnings are the most important.  The reason is Bank of America has a large consumer deposit base and thus has good visibility into consumer behavior.  Bank of America is saying that consumer spending is slowing.  In spite of a drag from ill timed bond purchases and losses on bonds, Bank of America earnings are better than expected.
  • Among other earnings, earnings from Goldman Sach (GS) and Lockheed Martin (LMT) are worse than expected; earnings from Johnson & Johnson (JNJ) are better than expected.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.
See also  MAKE OR BREAK MOMENT FOR AI FRENZY AHEAD – NVIDIA EARNINGS, HOPES DASHED IN U.K.

Magnificent Seven Money Flows

In the early trade, money flows are negative in Amazon (AMZN), Nvidia, Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).

In the early trade, money flows are mixed in S&P 500 ETF (SPY) and mixed in Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

The momo crowd is *** stocks in the early trade.  Smart money is *** stocks in the early trade.

Gold

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

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

Oil

The momo crowd is *** in oil in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) is range bound, there is enthusiasm about a bitcoin ETF, and has brought in buying.

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 $1937, silver futures are at $22.81, and oil futures are at $86.71.

S&P 500 futures are trading at 4379  as of this writing.  S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.

DJIA futures are down 122 points.

 

WALL STREET’S CALLOUS CALCULATION BASED ON BACK CHANNELS BRINGING IN STOCK MARKET BUYERS, BITCOIN BOOST

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

Callous Calculation

Please click here for a chart of West Texas Intermediate crude oil futures (CL_F).

Note the following:

  • The chart shows that oil is not moving up this morning.
  • The chart shows oil is significantly below the high it reached before Hamas attacked Israel.
  • The reason the oil is not moving up is that the US has threatened Iran through back channels to not escalate the dispute between Hamas and Israel.
  • To back up this threat the US has sent a second aircraft carrier group to the region.
  • The back channel warnings picked up steam after a statement by Iranian foreign ministers and a statement by Hamas.
  • The Arora Report members are already in the know.  We wrote in the Morning Capsule on October 13th.
  • Prudent investors should notice a statement by Iran’s Foreign Minister Hossein Amirabdollahian in Beirut, Lebanon.  He warned that there was a “real possibility” of opening other fronts if Israel continues to intensify the war in Gaza.

  • Prudent investors should also pay attention to a statement by Ali Barakeh, a senior Hamas official, that Iran and Hezbollah “will join the battle if Gaza is subjected to a war of annihilation.”

  • Wall Street is doing a callous calculation. The calculation is that the US warning through back channels have deterred Iran from using its proxy Hezbollah from opening a second front in northern Israel.  This will allow Israel to crush Hamas.  Wall Street’s calculation is that there will be carnage in Gaza but Gaza residents are poor with an annual income of $1200, they have no army, they have no electricity, no water, no fuel, and very little food.
  • In a matter more important to the stock market, the Biden administration is moving to tighten export controls to prevent China from getting advanced technologies, especially in semiconductors.
  • As we have previously shared with you, semiconductors are the leading sector in the stock market, and semiconductor companies have significant sales in China.
  • As an Arora Report member, you are already in the know from previous Morning Capsules that China has been able to circumvent trade restrictions.  To understand how China circumvents, take a look at this example.  China secretly sets up a company in Thailand.  The Thai company buys cutting-edge technologies from the US companies.  Since it is a Thai company it is not subject to US controls.  The Thai company transfers the technology and equipment to China.  The new restrictions are imposing stricter controls on companies in other nations buying and transferring to China.
  • Chinese chip design companies are also being added to the trade restriction list.  It appears that previously Chinese manufacturers could not get access to advanced US technologies but Chinese design firms could get access.
  • In view of these restrictions, prudent investors should watch semiconductor ETF (SMH), Nvidia (NVDA), Applied Materials (AMAT), and ASML (ASML).
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), and Meta (META).

In the early trade, money flows are negative in Tesla (TSLA), Apple (AAPL), and Nvidia due to new US restrictions on China.

In the early trade, money flows are positive in S&P 500 ETF (SPY) and positive in Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

The momo crowd is *** stocks in the early trade.  Smart money is *** in the early trade.

Gold

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

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

Oil

The momo crowd is *** in oil in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

The SEC has decided not to appeal in the Grayscale case.  This increases the odds that Grayscale Bitcoin Trust GBTC can be changed to an ETF.  Bitcoin (BTC.USD) is seeing strong buying on this news.

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 $1935, silver futures are at $22.70, and oil futures are at $88.24.

S&P 500 futures are trading at 4375  as of this writing.  S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.

DJIA futures are up 207 points.

 

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Picture of 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.

Picture of 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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