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

Pay Attention to Momo Behavior

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

Note the following:

  • In the Morning Capsule, we wrote and previously stated in the January Effect post

The assumption at this point in time is that the momo crowd is not going to change its behavior and will buy the dip.

Another assumption at this point is that momo gurus will come up with narratives to persuade their followers to keep on buying stocks.

  • For the time being, both assumptions have proven correct. Momo is aggressively buying the dip. Buying is most aggressive in tech stocks.
  • The Fed is finally listening to the data after being wrong for a long time on multiple counts.
  • Keep in mind that the Fed is talking about reducing the balance sheet down the road and perhaps going from 0.0% to 0.25% in March.
  • It is mind boggling that the Fed is still printing money and plans to continue money printing through March and then make an abrupt about turn.
  • Momo gurus have latched on to the foregoing point. Their new narrative to persuade their followers to buy stocks is that the Fed is still printing money for a couple of months.

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  • 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.
  • As expected, the VUD indicator was solid orange indicating heavy net supply of stocks at the open and right after the open.  As momo buying became aggressive, VUD fluctuated between green and orange.  As of this writing, VUD has turned solid green indicating net demand for stocks.
  • Considering the significant dip in tech stocks yesterday, the pattern traced by the VUD indicator is nowhere near as bullish as it should have been.  In prior dips since the pandemic, the day after the dip VUD tended to be solid green and also of higher magnitude.  This should be of concern for those who are super bullish.
  • There is no change in protection bands, cash levels, and hedges recommended in the Morning Capsule as well as in very long term positions at this time.  Of course, there is potential for all of this to change very quickly. 

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 🔒.

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.

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

🔒

Close

There appear to be sell on close orders.

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.

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.