WEEKLY STOCK MARKET DIGEST: MANCHIN STANDS UP — STOCKS GO LOWER, NEGATIVE REAL INTEREST RATES THROUGH 2022

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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.’

MANCHIN STANDS UP — TECH STOCKS GO LOWER

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

Manchin Stands Up

Please click here for a chart of  Nasdaq 100 ETF ().

Note the following:

  • The chart shows the Fed rally.
  • The chart shows a dramatic reversal of the Fed rally.
  • The chart shows that in the premarket,  is right at the upper band of the support zone.
  • RSI on the chart shows that tech stocks are losing momentum.
  • The strongest period of positive seasonality starts today. Momo gurus are urging their followers to buy aggressively. In yesterday’s Afternoon Capsule we showed you that the dramatic reversal was caused by smart money selling.  What happens next comes down to smart money.  If smart money stops selling, the market will rally.
  • On the positive side, in South Africa where omicron is spreading faster than wildfire, hospitalization rates are plunging. This gives hope that the omicron wave may be short-lived.
  • In our analysis based on data from South Africa, omicron in the U. S. may peak in mid-January and then decline.
  • The stock market has been primarily driven higher by two factors.
    • Money printing by the Fed and near-zero interest rates.
    • Massive government spending and government sending free money to those who do not need it.
  • Senator Manchin, who is a Democrat, stood up to the entire establishment and refused to go along with the gimmicks favored by the establishment.  Several prominent politicians are shocked that somebody would stand up against gimmicks.
  • Biden was pushing a $3.5 trillion Build Back Better plan.  Manchin thought that was too much money and said he would support $1.7 trillion.
  • Biden scaled back his plan to $1.75 trillion to meet Manchin.
  • Biden reduced the spending by using a gimmick.  The plan cost is over 10 years.  The plan calls for continuing to send up to $300 per month of free money per child largely to those who do not need it.  We are in favor of providing help to those who need it.
  • Even though the plan is for 10 years and Biden’s intention is to pay the child credit for 10 years, in the headline total Biden included the cost for only one year.  If Biden were to include the cost for 10 years, the cost of the child care credit alone would be $1.6 trillion, but Biden included only $185 billion as the price tag.
  • The plan has now been postponed until next year.  This weighed on tech stocks because there may be less government spending.

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 🔒 and 🔒 in the early trade.

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 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 $1808, silver futures are at $22.53, and oil futures are $71.17.

& 500 futures resistance levels are 4713, 4770 and 4900: support levels are 4600, 4460 and 4400.

 futures are down191  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.

See also  ECB RAISES INTEREST RATES BY 50 BASIS POINTS FOR THE FIRST TIME IN 11 YEARS – MOMO BUYS STOCKS

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.

TWO NEW REASONS TO BUY STOCKS — NEGATIVE REAL INTEREST RATES THROUGH 2022

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

Two New Reasons To Buy Stocks

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

Note the following:

  • Momo gurus are ecstatic. Their job is to keep on finding ways to persuade the crowd to buy stocks. The Fed has just handed them two new reasons to buy stocks.
    • Previously Powell had admitted that he made multiple wrong calls most notably on the extent and length of inflation. Now Powell has admitted another mistake — he underestimated the rapidness with which the labor market has progressed. To momo gurus, this indicates near full employment and a reason to buy stocks.
    • Even though Powell postured hawkishness, the reality is that he plans to keep negative real interest rates throughout the next year.  This is not hawkish.  This is dovish.  In the long run, negative interest rates are not good for the economy. However, in the short term, they can pump more air into the stock market bubble.
  • This morning momo gurus are renewing their calls to buy stocks.  Of course, they are very clever in their messages.  But the brutal truth behind their message is the reasons given above.
  • The chart shows the market is at resistance. Expect traders to push the market higher to new highs.
  • Bears contend that if the market rally fails again at this point, it will be negative from a technical perspective.
  • RSI is overbought but there is room to run.
  • The volume was heavy during the rally.  This is a positive.

Initial Claims

Initial Claims came at 206K vs. 195K consensus.

Housing Starts

Housing Starts came at 1.679M vs. 1.57M consensus.

Building Permits came at 1.712M vs. 1.67M 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 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 $1786, silver futures are at $22.31, and oil futures are at $71.54.

S&P 500 futures resistance levels are 4770 and 4900: support levels are 4713, 4600, and 4460.

 futures are up 175 points.

INVESTORS IGNORE THIS 60 YEAR CHART AT YOUR OWN PERIL

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

Ignore At Your Own Peril

Please click here for a chart of market yield on U. S. 10-year Treasuries at constant maturity less Consumer Price Index ex food and energy.

Note the following:

  • Start with Arora’s Second Law of Investing: Nobody knows with certainty what is going to happen next in the markets.
  • Prudent investors analyze various potential scenarios in advance.
  • The reckless money printing by the Fed and borrowing by Biden have created several realistic scenarios for the future.
  • One of the scenarios is the present thinking by investors and our leaders that money printing and borrowing is a free lunch turns out to be wrong.
  • Take a few minutes to study the chart.
  • Compare the present to 1980.
  • Ignore 1975 because that was due to an OPEC oil embargo.
  • See from the chart how high interest rates went after 1980.
  • At that time the Fed Chair Paul Volcker was able to raise interest rates significantly because the federal debt was nowhere near as high as it is now.
  • In 1980 stock valuations were very low compared to where they are now.
  • Serious investors should make a point of carefully listening to the podcast The Dirty Secret of the President and the Fed Chair That You Need to Know. Due to the importance of investors understanding the monetary and fiscal policies, we are planning a number of podcasts to help investors.
  • If the Fed loses control, the stock market can easily lose one-half of its value. Momo’s favorite stocks can easily lose 80 – 90% of their value.
  • The Fed is about to change its posture. We will find out soon if Powell has the spine to do what needs to be done.
  • Consider paying close attention to the Morning and Afternoon Capsules when they discuss the Fed and monetary policy.
  • The best course for investors is to not react now but pay close attention on a daily basis so that they stay in tune with what is going on based on real data and not on preconceived notions.
  • The Fed will announce its policy at 2:00 pm ET.  Powell’s press conference will start at 2:30 pm.
See also  VERY LITTLE INFLATION REDUCTION IN “INFLATION REDUCTION ACT”

Retail Sales

November Retail Sales ex-auto came at 0.3% vs. 0.9% consensus. This indicates that without Biden’s free money, spending by consumers is petering out.  a red flag for a large number of momos’ favorite stocks.

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 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

API showed inventory draw of 815K barrel vs. 2.6M barrels consensus. This data is bearish.

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 $1770, silver futures are at $21.82, and oil futures are at $70.23.

S&P 500 futures resistance levels are 4713, 4770, and 4900: support levels are 4600, 4460, and 4400.

 futures are down 24 points.

RECORD PRODUCER INFLATION

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

Producer Price Index (PPI)

Please click here for a chart of the Producer Price Index (PPI).

Note the following:

  • The chart shows that PPI came at 0.8% vs. 0.5% consensus.
  • Core Producer Price Index (CPI) came at 0.7% vs. 0.4% consensus.
  • Year over year PPI rose 9.6% vs. 9.6% consensus.
  • The PPI is at a record since it was reformulated back in 2010.
  • Previously when hot CPI numbers were released, the momo crowd dismissed them and bought stocks aggressively. Momo buying resulted in a rally.
  • The initial reaction to hot PPI is a selloff.
  • Momo is buying the dip as of this writing.

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 $1772, silver futures are at $21.78, and oil futures are at $70.29.

S&P 500 futures resistance levels are 4713, 4770, and 4900: support levels are 4600, 4460, and 4400.

 futures are down 115 points.

MOMO GURUS BUILDING A CASE TO BUY STOCKS AHEAD OF HAWKISH FED DECISION

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

Momo Gurus Advance A New Narrative

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 chart shows the market is now higher than when the omicron news was announced.
  • The chart shows that RSI is approaching overbought but has room to run to the upside.
  • The chart shows that the market is at a resistance zone near an all-time high.
  • We previously wrote:

Many investors make the mistake of thinking that the job of the momo gurus is to analyze the markets objectively and guide investors. This could not be farther from the truth. The sad reality is that the job of the momo gurus is to persuade investors to keep on buying no matter what the data is.

  • Momo gurus have developed a new narrative to push the market above the resistance zone.
  • Momo gurus need a new narrative because the Fed has changed its colors. The prior momo narrative was that the Fed was printing money and some of that money was going into the stock market.  This was the main reason to buy stocks.  Now the Fed is turning from dovish to hawkish.
  • The Fed is meeting tomorrow and Wednesday.  The policy decision will be announced on Wednesday at 2:00 pm ET.
  • Historically the momo bought ahead of the Fed meeting in anticipation of a dovish Fed.
  • Here is the new narrative from momo gurus to persuade the momo crowd to buy stocks and ignore the risks.
    • The Fed will be accelerating taper but will still be printing money for a few months.
    • When the taper is done, the Fed’s balance sheet will stand at $9 trillion due to all the money printing the Fed has done.   Prior to the financial crisis, the Fed’s balance sheet was under $1 trillion.
    • Historically, a large Fed balance sheet has been negative. However, now the momo gurus are claiming this is positive without any evidence.
    • Even when the Fed starts raising rates, the stock market should go up.  This has been true in some prior cycles, but in those cycles, valuations were nowhere near as high as they are now.
    • The Fed’s decision on Wednesday will be a clearing event and that is the main reason to buy stocks now.
  • Will momo gurus succeed as the Fed now has a different posture and Biden is having difficulty borrowing more money?
See also  WALL STREET FRONT RUNS BLIND MONEY IGNORING PELOSI TAIWAN VISIT, ECONOMIC CONTRACTION AND KASHKARI

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 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 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 $1784, silver futures are at $22.26, and oil futures are at $71.45.

S&P 500 futures resistance levels are 4713, 4770, and 4900: support levels are 4600, 4460, and 4400.

 futures are down 62 points.

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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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