WEEKLY STOCK MARKET DIGEST: PRUDENT INVESTORS PAY ATTENTION TO THE FASTEST ROTATION

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.’

STOCK MARKET SENTIMENT TURNS VERY POSITIVE IN THE FACE OF DARK VIRUS DAYS AHEAD

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

Sentiment Is Important

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

Note the following:

  • The chart shows that sentiment has turned very positive.
  • Sentiment is important and all prudent investors should pay attention to it.
  • When sentiment turns very positive, not only momo crowd becomes more aggressive, the FOMO (fear of missing out) crowd jumps in.
  • The most important use of sentiment is that it is a contrary indicator at the extremes. In plain English, this means that when sentiment turns extremely positive, it is a sell signal.
  • The reason that using sentiment as a contrary indicator often works is that when sentiment turns extremely positive, almost everyone who is going to buy in the very short term has already bought it. In such a situation, the slightest bit of selling can send stocks lower because there is no one left to buy.
  • The publicly available sentiment indicators are highly flawed. For this reason, a very long time ago, The Arora Report developed its own proprietary sentiment indicator.
  • One of the publicly available sentiment indicators is AAII sentiment survey.  This indicator rose by 17.9% to 55.8% in the latest reading.  As a reference, the indicator was 59.8% on January 3, 2018, which was extreme positive sentiment.
  • The chart shows that the momo crowd continues to buy.
  • The chart shows that RSI is overbought but has room to run.

Inflation

Core Producer Price Index (PPI) came at 0.1% vs. 0.2% consensus.  This indicates that after several hot readings, inflation is now cooling at the producer level.

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 $,1873 silver futures are at $24.80, and oil futures are $40.48.

S&P 500 futures resistance levels are 3600  and 3630: support levels are 3520, 3460 and 3420.

 futures are up 205 points.

Protection Bands and What To Do Now?

It is important for investors to look ahead and not in the rearview mirror.

Consider maintaining prior cash and hedge levels until dips.

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.

REAL DARK DAYS AHEAD — AGGRESSIVE MOMO BUYING IN THE STOCK MARKET

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

Dark Days

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

Note the following:

  • Real dark days are ahead. There are more than 120,000 coronavirus cases a day in the U. S.
  • There are some projections that new daily cases will reach 200,000 a day shortly.
  • Hospitalizations and deaths lag new cases.
  • There are projections of daily deaths reach over 10,000 shortly.
  • In many parts of the country, the health care system is about to break.
  • If the foregoing was not scary enough, the worse four months are likely ahead.
  • The momo crowd is buying aggressively on the bad news. The reasoning goes that the worse coronavirus gets, the better it is for stocks.  Could the momo crowd be wrong this time?
  • The chart shows aggressive momo buying after a brief sell off.
  • Smart money is selling into strength again.

Deploying Cash

We recently called to reduce cash levels and hedged on dips.  In our analysis, irrespective of aggressive momo buying, dips will likely come.  The big dips will be the time to reduce cash and hedges.

Investors need to be cautioned about reducing cash and hedges in one quick swoop right away.  The call previously given was to give you advanced notice so that you can consider acting on the dips.

Jobless Claims

Initial Jobless Claims came at 709K vs. 740K consensus.  The employment data continues to be better than expectations.  The reason is that the governments, businesses and the people themselves are virus fatigued and not taking the steps to control the virus.  This may change in the coming weeks as deaths rise and the healthcare systems start breaking down.

Inflation

Core CPI came at 0.0% vs. 0.2% consensus.  In our analysis, the way the government measures inflation is flawed.

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

There is speculation that OPEC will not increase production due to coronavirus.

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 $1876, silver futures are at $24.33, and oil futures are $41.75.

S&P 500 futures resistance levels are 3600  and 3630: support levels are 3520, 3460 and 3420.

DJIA futures are down 212 points.

PRUDENT INVESTORS PAY ATTENTION TO THE QUICKEST ROTATION IN RECENT MEMORY

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

Quickest Rotation

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

Note the following:

  • The chart compares  with small-cap ETF () and S&P 500 equal-weighted ETF ().
  • The chart shows when the rotation started.
  • Since the rotation started,  small caps have outperformed tech heavy QQQ by about 9%.
  •  has a strong value component.  has outperformed QQQ by about 8% in a very short time.
  • It is extremely important to observe that as smart money has flowed into value stocks, financial stocks, basic materials stocks, cyclical stocks and small-cap stocks, the momo crowd has been buying tech stocks aggressively.
  • The momo crowd is also extremely aggressively buying airlines and cruise lines.
  • Smart money is also buying airlines and cruise lines but not aggressively.
  • How will this rotation resolve?  We will answer that in future posts.
  • The foregoing emphasizes why investors should hold a diversified portfolio and not a portfolio over-concentrated in ‘stay at home stocks.’
  • The portfolios of a large number of investors have become overly concentrated in stay at home stocks. Such portfolios should be adjusted immediately.

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 momoc 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 $1859, silver futures are at $23.97, and oil futures are $42.60.

S&P 500 futures resistance levels are 3600  and 3630: support levels are 3520, 3460 and 3420.

DJIA futures are up 174 points.

TRIPLE TOP CONCERN ABOUT TECH STOCKS, COVID ANTIBODY DRUG APPROVED

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

Potential Triple Top Concern

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

Note the following:

  • The chart shows a potential triple top.
  • The chart shows that yesterday on good news about the vaccine, Nasdaq was rejected right at the resistance line.  This is a negative.
  • The chart shows that yesterday after the rejection, Nasdaq closed near its lows. This is a negative.
  • The chart shows that Nasdaq is gapping down.  This is a negative.
  • Nasdaq is gapping down while Dow Jones Industrial Average () futures are up 160 points. This is a negative.
  • This is a continuation of the trend we described in yesterday’s Afternoon Capsule.  Please click here to see the chart showing the trend.
  • The chart shows that the rejection occurred at high volume.  This is a negative.
  • The chart shows that RSI was not overbought when the rejection occurred.  This is a negative.
  • The chart shows that RSI was lower this time compared to the last time when the rejection occurred.  This is a negative.
  • The chart shows that RSI was lower last time compared to the prior time when the rejection occurred.  This is a negative.
  • The sum total of the foregoing is that a rotation is taking place out of tech stocks into financial stocks, small caps, basic materials, cyclicals and value stocks.

Caution

In the very, very short term, the rotation is overdone and may reverse itself.  Further, value stocks have now become very expensive in just one week.

Antibody Drug 

The antibody drug from Lilly () has been approved for the treatment of mild to moderate COVID-19.  This is creating optimism.

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 after yesterday’s selling gold.  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 $1879, silver futures are at $24.39, and oil futures are $40.90.

S&P 500 futures resistance levels are 3600  and 3630: support levels are 3520, 3460 and 3420.

 futures are up 160 points.

REDUCE CASH AND HEDGES, 90% VACCINE EFFICACY

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

Reduce Cash And Hedges

Both cash and hedge levels are being reduced.  It is best to make the transition in several steps — some now and more on the dips.

Vaccine

Vaccine data from Pfizer () and BioNTech () has shown 90% efficacy.  FDA has been willing to approve efficacy of 50%.  Most expectations have been for efficacy of less than 70%

The news is much better than expected.

Many hurdles still remain.

Breakout Above The Magnet 

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

Note the following:

  • The chart shows the magnet that has been attracting the traders.
  • The chart shows that stocks have jumped above the magnet on the vaccine news.
  • The next magnet for traders will be the trendline shown on the chart.
  • RSI has jumped into the overbought zone however the news is simply too powerful.  Any dip is likely to be a shallow dip and should be considered an opportunity to buy.
  • The chart of popular stock market index Dow Jones Industrial Average () is showing strength.  The chart of Nasdaq 100 ETF () has pockets of weakness as stay at home stocks may be sold.

The Good Way

Investors who normally follow the Best Way but are aggressive may consider scaling in small tranches using the  Good Way and Buy Now ratings.

Nibbling

Consider nibbling on select stocks and ETFs on dips.

Model Portfolios

Model Portfolios were updated yesterday, we will be sending you new updates shortly.

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔏 stocks in the early trade.  Smart money is 🔏.

Gold

The vaccine is bad for gold.

The momo crowd is 🔏 gold in the early trade.  Smart money is 🔏.

For longer term, please see gold and silver ratings.

Oil

The vaccine is good news for oil.

The momo crowd is 🔏 buying oil in the early trade. Smart money is 🔏 oil.

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 $1870, silver futures are at $24.10, and oil futures are $40.60.

S&P 500 futures resistance levels are 3520, 3600 and 3630: support levels are 3460, 3420 and 3390.

 futures are up 1736 points.

A knowledgeable investor would have turned $100,000 into over $1,000,000 with the help from The Arora Report. NOW YOU TOO CAN ALSO SPECTACULARLY SUCCEED AT MEETING YOUR GOALS WITH THE HELP OF THE ARORA REPORT. You are receiving less than 2% of the content from our paid services. …TO RECEIVE REMAINING 98% INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES, TAKE A FREE TRIAL TO PAID SERVICES.

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