WEEKLY STOCK MARKET DIGEST: NEW DATA RAISES THE SPECTER OF THE “S” WORD NOBODY WANTS TO TALK ABOUT

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.’

CCP STATEMENT STEMS THE DAMAGE TO STOCKS BUT MOMO BURNED ON AMAZON AND APPLE OPTIONS

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

Hope Strategy

Please click here for a chart of Amazon (AMZN).

Note the following:

  • The chart shows when the momo crowd aggressively started buying Amazon (AMZN) and Apple (AAPL) options on hopes of good earnings after hours. Most of these options are expiring today.  These options will expire worthless, causing major losses to the momo crowd.
  • Long time Arora Report subscribers have benefited significantly from diversification by strategies.  At The Arora Report, we pick from over 50 different strategies – the strategy of hope is not one of them.
  • We wrote in the Afternoon Capsule,

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 Afternoon Capsule was titled “TRIPLE MOMO HOPE LIFTS THE MARKET  700 POINTS – FED, APPLE, AND AMAZON.” Please read the Afternoon Capsule for details.
  • Amazon earnings were significantly worse than the whisper numbers. Apple earnings were stellar. However, on the conference call, Apple indicated it would take a $4-8B hit due to supply chain issues.
  • The chart shows the steep drop in Amazon stock.
  • The chart shows that the hope strategy kicked in again with the momo crowd aggressively buying the dip. Clearly, the momo crowd was not analyzing the data provided by  in the earnings release and in the conference call.
  • Amazon is facing significant headwinds.
  • 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.
  • The chart shows that net demand for the stock after the dip was extremely strong.

CCP Stems The Damage

Based on the earnings from Apple, Amazon, Intel (INTC), and Robinhood (HOOD), the NASDAQ would have likely been down 400-500 points this morning, but it is down only 171 points as of this writing.

What saved the day?

Coincidentally, China’s Communist Party Politburo stated that China would increase stimulus. Markets across the globe love government stimulus.  China will also relax its policies for big tech. These statements from China improved the sentiment and lifted stock futures across the globe.

The strength stemming from Chinese statements is carrying through to the U.S. stock futures this morning in the form of lower losses.

Person Income

The U.S. economy is 70% consumer based.  For this reason, investors need to pay attention to personal income and spending.

Personal income came at 0.5% vs. 0.4% consensus.

Personal spending came at 1.1% vs. 0.6% consensus.

Note that spending has continued to increase, more than the increase in income.  The reason is that consumers feel wealthy because of the spike in home prices and government programs.

PCE Prices

PCE prices came at 0.9% vs. 0.7% consensus.

Core PCR prices came at 0.3% vs. 0.3% consensus.

Employment Cost Index

Employment Cost Index came at 1.4% vs. 1.1% consensus.

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

Money is flowing out of stocks and into gold as the dollar falls on CCP statements. 

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

Germany has indicated that it will not oppose a ban on Russian oil. This is lifting 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 is being sold in sympathy with speculative stocks.

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 $1913, silver futures are at $23.25, and oil futures are $106.52.

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

 futures are down 171 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 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.

 

NEW DATA RAISES THE SPECTER OF THE “S” WORD NOBODY WANTS TO TALK ABOUT

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

New Data

Please click here for a chart of Real GDP: Percent change from preceding quarter.

Note the following:

  • An ugly set of data was released a few minutes ago.
    • Q1 GDP – Adv. came at -1.4% vs. +1.1% consensus.
    • Q1 GDP Deflator – Adv. came at 8.0% vs. 7.3% consensus.
  • The new data is alarming. The chart shows that this is the first negative GDP print since the pandemic started.
  • The data shows that negative GDP is accompanied by high inflation.
  • The “S” word nobody wants to talk about is stagflation.
  • The new data indicates stagflation.
  • Wall Street and investment gurus in particular do not want to talk about the specter of stagflation.  The reason is that the long bull run of the last 13 years with a brief pandemic interruption has helped Wall Street and the gurus for the first time in history to convince the masses that popular stocks will continue to go up and the stock market always makes new highs; and bear markets are short and investors need to stay invested.
  • If we run into an extended period of stagflation, all of the foregoing will be wrong.
    • Pull up a chart of the stock market from 1967 – 1982 and see for yourself.
    • Just like Apple (AAPL), Google (GOOG), Microsoft (MSFT), Amazon (AMZN), Nvidia (NVDA), Tesla (TSLA), AMD (AMD), etc. are the popular stocks of the day that investors believe in, take a look at what happened to the similar popular stocks of the day from 1967 – 1982 – a 15 year period.
  • No reason to worry, this is only one set of data.  There will need to be more new sets of data before making bigger changes in the portfolios. We have already made changes in ZYX Buy Portfolio to account for the prospect of stagflation.  We are working on similar changes to ZYX Allocation and ZYX Emerging Portfolios.
  • The key is for investors to stay alert and respond when the new data comes in.
  • Let us hope for the best that an extended period of stagflation does not occur, but if it is to occur, it will be important for investors to get ahead of the curve and not become bag holders like a large number of investors who put their faith in Wall Street experienced from 1967 – 1982.  
  • Please pay attention to the “Protection Bands And What To Do Now” section below.

Jobless Claims

Initial claims came at 180K vs. 182K consensus.

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 momo crowd is 🔒 oil in the early trade.  Smart money is 🔒 in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin is moving up with stocks.

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 $1886, silver futures are at $23.08, and oil futures are $101.66.

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

 futures are up 196 points.

 

MOMO BUYS BELIEVING THE FOURTH TIME IS THE CHARM

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

Momo Buys

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 that yesterday was the fourth time the market closed near the recent lows.
  • The chart shows that the momo crowd bought the last three dips in this region.
  • Yesterday was the fourth dip in this region.
  • The chart shows the Arora Buy Signal right near the last dip that led to a strong tradable rally.
  • The chart shows the Arora call to raise hedges right near the top. A signal to  reduce  cash was given shortly thereafter.
  • The chart shows that the market closed at its low yesterday.
  • After the close there were important earnings from GOOG, MSFT, and TXN.
    •  had a rare earnings miss. Advertising sales have slowed at YouTube. The outlook for YouTube is also weak. This has negative implications for FB.
    •  earnings were good.
    •  is an important semiconductor company. The company guided below consensus. The reason is COVID restrictions in China.  This has negative implications for semiconductor stocks, such as QCOM, AMAT, NXPI, QRVO, AMD, ADI, and NVDA.
  • In after hours, the market went lower on disappointing earnings. Later on, the momo crowd started buying the dip. The momo crowd continues to buy as of this writing.
  • The belief among the momo crowd is that the fourth time is the charm and the market will rally from here to new highs because “stonks always go up.”   
  • Prudent investors should know the following. The momo crowd may turn out to be right if the Fed loses its spine to curb inflation.
  • There is a fair probability that many of today’s popular stocks may not make higher highs over the next ten years.
  • There is a fair probability that some of today’s popular stocks may be 50% lower or more ten years from now. 
  • Take a look at the chart of NIKKEI 225, which is the equivalent of Dow Jones of Japan. NIKKEI hit 38,957 in 1989. At that time, our Japanese friends were saying that they were not worried about the market going down because the market always went up. NIKKEI fell to 7,054 in 2009.  This was an 81.9% drop in 20 years. 

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

API data was bearish.

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 is range bound.

Markets

Our very, very short-term early stock market indicator is 🔒 due to noise in the data. 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 $1894, silver futures are at $23.64, and oil futures are $100.96.

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

 futures are up 191 points.

 

PAY ATTENTION: WALL STREET POSITIVELY POSITIONED FOR MICROSOFT, APPLE, FACEBOOK, GOOGLE, AND AMAZON

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

Nuclear War Threat

Not long ago, Russia’s actions in Ukraine were unthinkable. Similarly now, a nuclear war between Russia and the United States is unthinkable.  However, investors need to pay attention that Russia’s Foreign Minister Sergei Lavrov is warning of a serious risk of nuclear war, and he wants to talk to the United States to resolve the issue.  This is a major escalation.  Right now, Wall Street is oblivious.

It is important for investors to not become overly aggressive and take note of the “Protection Bands And What To Do Now” section below.

Positive Positioning

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:

  • What happens next in the market in the short term will come down to big tech earnings.
  • Big tech earnings are ahead.
    •  reports today after the close.
    •  reports today after the close.
    •  reports Wednesday after the close.
    •  reports Thursday after the close.
    •  reports Thursday after the close.
  • In addition to the earnings themselves, Wall Street’s positioning ahead of the earnings is very important.  Paying attention to the positioning gives you a big edge.  For those interested in next-level information on positioning, please listen to the podcast “Market Mechanics: Positioning.”
  • Wall Street is positioned positively for big tech earnings. 
    • There are several scenarios.  The most important scenario in view of the positive positioning is that a disappointment in earnings has the potential to cause significant selling in the stock market.
    • On the other hand if earnings are positive, Wall Street will gain more confidence in their positioning and start aggressively buying.
  • The chart shows the lower support zone.
  • In view of the positive positioning, if there is a disappointment in earnings, this lower support zone will act like a magnet.
  • The chart shows that yesterday’s rally, driven in part by short squeeze, carried the market into the support zone.
  • The chart shows that this morning the stock market is pulling back, but it is still in the support zone.

Durable Goods

Durable Goods came at 0.8% vs. 1.1% consensus.

Durable Goods ex-transportation came at 1.1% vs. 0.5% consensus.

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 momo crowd is 🔒 oil in the early trade. Smart money is 🔒 in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin is range bound.

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 $1902, silver futures are at $23.58, and oil futures are $99.24.

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

 futures are down 182 points.

 

FEARS OF BEIJING LOCKDOWN SEND COMMODITIES PLUNGING AND BONDS HIGHER

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

Beijing Lockdown

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 that the market is at the lower band of the support zone.
  • On Sunday night, stock futures attempted a rally, but the rally was sold on fears of a Beijing lockdown.
  • Earlier this morning, the market was below the lower band of the support zone, but the momo crowd’s aggressive buying has brought it back to the lower band as of this writing.
  • The chart shows that the sell off was on heavier volume, whereas the prior day’s sell off was not on heavy volume.
  • The chart shows that even the heavier volume was not heavy enough to indicate that this was a bottom.  Typically, when volume is very heavy, sellers get exhausted and it leads to a tradable rally.
  • RSI is showing a divergence.  In plain English, this means that RSI is going higher as the price is going lower. Normally this is a bullish signal. However, this divergence is in the oversold zone and tightly packed.  Under these conditions, the signal from RSI often fails.
  • 25 million people have been locked down in Shanghai for weeks. Now the fears are that the same thing is about to happen in Beijing. Several other locations in China are being locked down.
  • Stocks in Shanghai fell the most in about two years.
  • Offshore yuan has weakened by about 1%.  For a currency, this is a large move.
  • Iron ore futures plunged in China. Ironically, Wall Street was uniformly recommending buying steel stocks near their highs last week. As a full disclosure, ZYX Short has a short position in steel. The position is now very profitable.
  • Oil has fallen below $100 on China fears. Ironically, most investors who have been rushing into buying oil now have big losses on their trades. As a full disclosure, ZYX Short has a short position in oil.  ZYX Short also has a short position in a popular oil stock.  There is also a small oil position in the inverse oil ETF in ZYX Buy.  These positions are nicely profitable.  In ZYX Allocation, a signal was recently given to take full or partial profits in an oil exploration ETF.
  • Other commodities are also plunging.
  • The irony is that U.S. investors have been rushing into commodities and commodity stocks headlong to protect themselves against inflation.
  • Bonds are being bought on China fears. As a result, interest rates are ticking down.

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 momo crowd is 🔒 oil in the early trade.  Smart money is 🔒 in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin is range bound but below $40,000.

Markets

Our very, very short-term early stock market indicator is 🔒 due to pressure from the situation in China at cross currents with aggressive momo crowd buying this morning.  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 $1894, silver futures are at $23.62, and oil futures are $97.37.

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

futures are down 86 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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