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.’
INTEREST RATES AND CHINA FACTORY GATE PRICES HELP STABILIZE THE STOCK MARKET
To gain an edge, this is what you need to know today.
Interest Rates And China Factory Gate
Please click here for a chart of 7 – 10-year Treasury bonds (IEF).
Note the following:
- Interest rates have stopped their downward move and are ticking up.
- IEF moves inverse to interest rates.
- The chart shows that IEF has stopped going up and is beginning to retreat.
- The chart shows that RSI is rolling over from the overbought condition.
- The China factory gate prices rose 8.8% year-over-year vs. 8.8% consensus. In May the prices rose 9.0%. The lower number for June is a relief for the markets.
- The rise in interest rates and lower factory gate prices in China are stabilizing the stock market.
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 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 $1801, silver futures are at $26.97, and oil futures are $74.04.
S&P 500 futures resistance levels are 4400 and 4460: support levels are 4318, 4200 and 4000.
DJIA futures are up 253 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.
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.
RAISE CASH – FED WAS WRONG – MONEY PRINTING MAY BECOME LESS RECKLESS
To gain an edge, this is what you need to know today.
Raise Cash
Consider raising cash. Depending upon your personal preference, it is appropriate to take some partial profits especially on up spikes. For details, please see the ‘Protection Bands and What To Do Now?’ section below.
Fed Was Wrong
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- Earlier this week we wrote:
The seasonality is positive this week but will turn negative next week.
The third quarter is historically the weakest quarter. Markets tend to dip from August to October.
The chart shows that RSI is very overbought and now flattening. This indicates that a pullback may be coming.
- The chart shows Arora’s call to raise cash today.
- Note from the chart that the timing of the last three Arora sell signals was as perfect as it gets in real life.
- Note from the chart that the timing of the last two buy signals was also as perfect as it gets in real life. These signals follow hundreds of spot-on signals over a very long period in both bull and bear markets.
- The chart shows that RSI has turned down.
- The chart shows that the rally has been on low volume. As we have previously shared with you, low volume rallies indicate a lack of conviction.
- It is important for investors to keep in mind Arora’s Second Law of Investing: Nobody knows with certainty what is going to happen next in the markets.
- We have been warning you that the momo crowd as well as a large number of institutional investors have been putting blind faith in the Fed and Biden.
- We have also been warning you that those who have studied history know that the Fed has often been wrong especially at critical junctions.
- We shared with you the details of the Fed minutes yesterday.
- The Fed minutes show that Fed officials have been surprised by the surge in prices of goods and services.
- The Fed minutes indicate that the Fed may be forced to give up its intransigence of recklessly printing money on the pretext of helping those who are on the low end of the economic totem pole.
- If the Fed becomes less accommodative, it may cause a dip in the stock market as less air will be pumped into the stock market bubble.
- When markets get overbought, they become vulnerable to a pullback. On the days the market is going up, talking heads have all sorts of explanations for the market going up. On the days the market drops, the same talking heads have, after the fact, all sorts of explanations for the market drop. Today is no different.
Jobless Claims
Initial Jobless Claims came at 373K vs. 350K consensus. This is a leading indicator and carries heavy weight in our models.
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 reported a draw of 7.983M barrels vs. consensus of a draw of 6.2M 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 $1816, silver futures are at $26.16, and oil futures are $71.90.
S&P 500 futures resistance levels are 4318, 4400, and 4460: support levels are 4200, 4000, and 3950.
DJIA futures are down 481 points.
BOND YIELDS FALL TO WORRISOME LEVEL AHEAD OF FED MINUTES
To gain an edge, this is what you need to know today.
Worrisome Fall
Please click here for a chart of 7 – 10 year Treasury bond (IEF) yield.
Note the following:
- Based on subscriber feedback, we are using a chart of ETF IEF instead of a chart of 10- year yield because most subscribers find it easier to watch the chart of IEF.
- In yesterday’s Afternoon Capsule we wrote:
On fear of an economic slowdown, the 10-year Treasury yield fell to 1.35%. This is the lowest yield since February 24, 2021.
When the 10-year yield falls below 1.40%, smart money becomes very concerned.
- This morning, the 10-year yield has fallen to 1.30%
- Bonds move inverse to the yield.
- The chart shows IEF is breaking out.
- Note the big move up in IEF from its lows.
- The reason the fall in the yield is worrisome is because it indicates one or more of the following:
- The Fed will continue to print money at the present rate for a long time.
- The Fed will continue to buy bonds at a high rate for a long time.
- The Fed will not raise interest rates for a long time.
- After the initial rush of reopening, the economy is headed for a significant slow down.
- Instead of inflation, there will be deflation.
- A part of the drop in the yield may be due to the foreign buying of U. S. bonds but that does not fully explain the big drop.
- The latest drop yesterday coincided with the weak ISM number. Yesterday, in the Afternoon Capsule we wrote:
June ISM Non-Manufacturing Index came at 60.1% vs. 63.0% consensus. This indicates that the economy is likely to slow down.
- The drop in yield is the exact opposite of what was expected from the economy reopening.
Fed Minutes
The Fed minutes will be released at 2:00 pm ET. These minutes may be a market-moving event.
We will be carefully studying these minutes to get some insights behind the drop in yields.
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 slightly 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 $1802, silver futures are at $26.38, and oil futures are $73.72.
S&P 500 futures resistance levels are 4400 and 4460: support levels are 4318, 4200, and 4000.
DJIA futures are down 44 points.
MOMO BUYING STOCKS – OPEC IN DISARRAY, HIGHLY INFECTIOUS LAMBDA VIRUS
To gain an edge, this is what you need to know today.
Momo Buying
Please click here for a chart of Nasdaq 100 ETF (QQQ.
- The seasonality is positive this week but will turn negative next week.
- The third quarter is historically the weakest quarter. Markets tend to dip from August to October.
- The chart shows that RSI is very overbought and now flattening. This indicates that a pullback may be coming.
OPEC In Disarray
OPEC+ is in disarray. UAE has broken ranks with Saudi Arabia. So far the cartel has failed to reach a production increase agreement.
Highly Infectious Lambda Virus
So far, the Lambda variant of coronavirus has been the most infectious variant.
Now 81% of cases in Peru are from Lambda. Peru now has the highest death rate from COVID.
Lambda variant has now been found in Australia.
New data from Israel shows that protection of the PFE vaccine may be as low as 64% against the Delta variant.
The UK will lift all virus-related restrictions. The government’s reasoning is that people need to learn to live with the virus. The government expects deaths from the virus to go up after restrictions are lifted.
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 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 $26.70, and oil futures are $74.83.
S&P 500 futures resistance levels are 4400 and 4460: support levels are 4318, 4200 and 4000.
DJIA futures are down 26 points.
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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 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.
