WEEKLY STOCK MARKET DIGEST: INFLATION RISES, MOMO BUYING ON INFRASTRUCTURE DEAL

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.’

The new data shows that inflation is rising.  Momo crowd is drinking the Kool-aide that inflation will be transitory.  Wages are rising sharply.  Have you ever known wages to come down?  Imagine the boss calling his workers and saying instead of getting a raise you are getting a pay cut because inflation is transitory.

The momo crowd is excited about the infrastructure deal and aggressively buying stocks.  The momo crowd is ignoring the significant opposition to the deal in Congress.

There is selling under the surface.

INFLATION RISES, MOMO EXCITED ABOUT INFRASTRUCTURE

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

Momo Excited

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

Note the following:

  • The momo crowd is aggressively buying on excitement over the infrastructure deal.  Momo is buying on the headlines without looking at the details.
  • There are doubts about the infrastructure deal passing Congress as the opposition is mounting in the Democratic party.  Further, the infrastructure deal is a lot smaller than the original.  Please read yesterday’s Afternoon Capsule for more details.
  • The chart shows that the market continues to rise.
  • The chart shows RSI divergence – as the price is rising, RSI is falling.  This shows a loss of internal momentum.

Inflation Rises

PCE is Fed’s favorite inflation measure.  May PCE price index came at up 3.9% vs. 3.9% consensus.

Core PCE price index came at up 3.4% vs. 3.5% consensus.

Personal Income And Spending

Personal Income came at -2.0% vs. -2.5% consensus.  The reason for the drop is that there is no Biden free money during this period.

Personal Spending came at 0.0% vs. 0.3% consensus. This indicates that consumers are slowing their 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🔒.

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 $1765, silver futures are at $26.30, and oil futures are $73.43.

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

DJIA futures are up 167 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.

AGGRESSIVE BUYING AS MOMO CROWD GETS EXCITED ABOUT THE BREAKOUT

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

Breakout

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

Note the following:

  • The chart shows another up move in the premarket after the breakout.
  • Gurus are coming out of the woodwork advising their followers to aggressively buy momo stocks to push them higher.
  • This is a new world.  The stock analysis used to be about fundamentals, quantitative factors, technicals, and macro.  In this new world, it is all about urging followers to aggressively buy so that their collective buying pushes stocks higher.  It has become all about pumping and not much about analysis.
  • Momo stocks are being aggressively bought.
  • RSI and volume are not confirming the move.
  • Let us see if smart money steps in to sell the strength as they often do.  However, the smart money is aware that seasonally the two best weeks are ahead.

Jobless Claims

Weekly Initial Claims came at 411K vs. 380K consensus.

GDP

Q1 GDP-Third Estimate came at 6.4% vs. 6.4 consensus.

Durable Goods

Durable Goods came at 2.3% vs. 2.8% consensus.

Durable Goods ex-transportation came at 0.3% vs. 0.7% 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 and bonds are range bound.

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 $1784, silver futures are at $26.12, and oil futures are $72.56.

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

DJIA futures are up 157 points.

CAPTURE IMMENSE GAINS SUCH AS 2670% — INDEPENDENCE DAY SALE — DOUBLE BONUS: ACT NOW TO GET FREE TRIALS

NASDAQ BREAKS OUT – SEASONALLY THE BEST TWO WEEKS AHEAD

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

Breakout

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

Note the following:

  • The chart shows that after backing and filling, Nasdaq has broken out again.
  • The chart shows the breakout is on low volume.
  • This indicates a lack of conviction.
  • The pattern lately has been that the volume is high on down days and low on up days.  This indicates that as the market goes higher, distribution is taking place. Ideally, when the market goes higher accumulation should take place.
  • The chart shows RSI divergence. In plain English, this means that as the price has gone higher momentum has not.  This is a negative and often a precursor to a pullback.

The Best Two Weeks

Seasonality does not always work. Nonetheless, investors should pay attention to seasonality.  Based on seasonality, next week investors will get in the holiday mood ahead of Independence Day and buy stocks. Seasonally, the next two weeks are often the best two weeks of the year.

Europe

Business growth in Europe has accelerated at the fastest rate in 15 years. IHS Markit’s Composite Purchasing Managers’ Index came at 59.2 vs. 58.8 consensus.

The U. S. PMI

The U. S. Purchasing Manager’s Index (PMI) will be released at 9:45 am ET.  It may move the markets.

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 came at a draw of 7.199M barrels vs. consensus of a draw of 3.94M 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 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 $1785, silver futures are at $26.03, and oil futures are $73.73.

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

DJIA futures are up 56 points.

PLEASE NOTE: UPCOMING CHANGE IN FORMAT AND EMAIL SERVICE PROVIDER

POWELL HOLDS THE LINE BUT REPUBLICANS WILL TRY TO TRIP HIM

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

Powell Testimony

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

Note the following:

  • The chart shows that  has moved above the breakout line.
  • The chart shows that RSI is indecisive and can go either way.
  • The market-moving event will be Powell’s testimony.
  • Powell will be testifying at 2:00 pm ET before the House Select Subcommittee on the coronavirus crisis.
  • Powell’s prepared text shows that Powell is holding the line that inflation will be transitory.
  • It is an important reminder for investors that we are politically agnostic.  Our sole job is to help investors. The point below is not about politics but is very significant for investors. Good investors set their politics aside.
  •  In Q&A, Republicans will likely attempt to trip Powell.  Republicans have a great argument – Powell is enabling Democrats to borrow recklessly and spend excessively by artificially keeping interest rates low. Of course, Republicans have no credibility because they also borrow and spend excessively when they are in power; Republicans become against reckless borrowing and excessive spending only when they are not in power.
  • How Powell handles the minefield will determine the direction of the stock market.

Bitcoin

Bitcoin is coming under pressure and has fallen below $30,000.

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 $1773, silver futures are at $25.76, and oil futures are $72.75.

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

DJIA futures are up 31 points.

CAPTURE IMMENSE GAINS SUCH AS 2670% — INDEPENDENCE DAY SALE — DOUBLE BONUS: ACT NOW TO GET FREE TRIALS

OVERSOLD BOUNCE – LONG TERM TREND STILL INTACT, CHINA CRACKDOWN ON BITCOIN

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

Oversold Bounce

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

Note the following:

  • RSI on the chart shows that it had become oversold.
  • When a market gets oversold, it typically bounces.
  • Stock futures were lower yesterday evening but they have turned positive on an oversold bounce.
  • The chart shows the support line.
  • The chart shows that the market is still way above the support line.
  • The chart shows that the market is still way above the trend line.
  • The chart shows that the support line and the trend line are converging. This means that there is strong support around S&P 500 4,000 level.

Bitcoin Crackdown

Bitcoin is tumbling on the China crackdown. China is prohibiting banks from providing payment services for crypto transactions.

Also, in a hydropower-rich region of China, restrictions are being placed on crypto mining.

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 $1777, silver futures are at $25.97, and oil futures are $71.10.

S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are up 247 points.

PLEASE NOTE: UPCOMING CHANGE IN FORMAT AND EMAIL SERVICE PROVIDER

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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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