DON’T FOLLOW THIS STRATEGY – HUGE LOSSES IN APPLE AND AMAZON

By Nigam Arora & Dr. Natasha Arora

Editor’s note: Consider not following the ‘hope strategy.’ This strategy has always led to losses with the exception of the last few years.  Over the last few years the strategy has worked due to Fed money printing.  Now the money printing has stopped.  Yesterday the market rose over 700  DJIA points as the momo crowd aggressively bought Amazon and Apple options on the hope of good earnings afterhours.  There hopes were dashed when Amazon reported terrible earnings and Apple reported stellar earnings but warned of a $4-$8B hit due to supply chain issues.  Many options that were bought yesterday and are expiring today are worthless.  As a paying subscriber to The Arora Report, you would have avoided the pain.  The following Afternoon Capsule was written prior to the release of the earnings while the market was still open and momo crowd was aggressively buying.

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

Triple Hope

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:

  • Hope has been a losing strategy in the stock market with the exception of the last few years.  Over the last few years the hope strategy has worked well due to Fed money printing.
  • The chart shows a very strong rally. The rally is being caused by triple hope.
    • In the Morning Capsule we shared with you that the economy shrank by 1.4%.  Please read the Morning Capsule for details. The momo crowd is hopeful that this morning’s data will make the Fed less aggressive.
    • Apple (AAPL) reports earnings after the close.  The momo crowd is aggressively buying Apple on hopes of a good earnings report.
    • Amazon (AMZN) reports earnings after the market close.  The momo crowd is aggressively buying Amazon on hopes of good earnings.
  • Strong up moves in Apple and Amazon are creating a positive sentiment that is lifting the entire market.
  • The set up is a bounce on the fourth dip in the same zone.  Please see “MORNING CAPSULE: MOMO BUYS BELIEVING THE FOURTH TIME IS THE CHARM.”
  • All of the buying is from the momo crowd.
  • There is no smart money buying.
  • There is quite a contrast between the momo crowd and smart money.
  • Momo crowd buys on the hope because they believe that they know for sure stocks are going to go up.  Smart money buys when the risk is low and it has an edge.
  • The Momo crowd is focused on rewards and ignores the risks.
  • Nobody knows for sure if Apple and Amazon earnings are going to be good. Therefore there is risk.
  • Smart money seldom buys ahead of earnings.
  • The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.
  • In the morning, the VUD indicator was solid orange, indicating a net supply of stocks.
  • After the rally started, the VUD indicator is solid green, indicating net demand for stocks.

Money Flows

The momo crowd money flows since the Morning Capsule are 🔒 (To see the locked content, please take a 30 day free trial).

Smart money flows since the Morning Capsule are 🔒.

Short squeeze money flows are 🔒.

A Special Note To New Subscribers

Note the smart money behavior.  Smart money tends to sell into strength on strong up days.

New subscribers should consider adopting smart money’s way of investing and trading.

Sentiment

Sentiment is very 🔒.

Sentiment is a contrary indicator at extremes.  In plain English, this means that when sentiment becomes extremely positive it is time to sell and when sentiment becomes extremely negative it is time to buy.

Close

Orders on close are indeterminable.

There is merit to watching the pattern of market on close orders as they represent the day’s dominant net cumulative activity by many professionals and funds.

Gold

The momo crowd money flows in gold are 🔒 since the Morning Capsule.

Smart money flows are 🔒 in gold since the Morning Capsule.

Oil

The momo crowd money flows in oil are 🔒 since the Morning Capsule.

Smart money flows in oil are 🔒 since the Morning Capsule.

Buy Zones And Buy Now Ratings

🔒

Nibbling

🔒

This post was published yesterday in The Arora Report paid services.  Since then the Morning Capsule has had an update in the paid services.

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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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