By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know now.
Hat Off To Powell
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:
- Please start by reading yesterday’s Morning Capsule titled “MORNING CAPSULE: FED HAS A PROBLEM – MOMO GURUS READY TO RUN UP THE STOCK MARKET 10-15%.”
- Kudos to the Fed and our hat off to Powell for doing an excellent job at communicating what was obvious to any astute observer but momo gurus were wrongly twisting.
- Before you send us an email that The Arora Report is always praising the Fed, go back and review the archives. Remember that The Arora Report is unbiased. Our sole job is to help you maximize the wealth you generate over your lifetime. We praise the Fed when praise is due, and we are critical of the Fed when they are wrong. The Arora Report was the first one in 2020 to call that the Fed’s policy was wrong and would lead to inflation. The Arora Report was highly critical of the Fed throughout 2020 and 2021. The Arora Report call that said inflation would not be transitory has proven spot on. Our record is in the open – The Arora Report is the only one that has called every major Fed related call correctly for the last 15 years.
- The chart shows when the statement was released.
- The Fed raised interest rates by 75 basis points as expected.
- From the first Interim Capsule:
The Fed says, “In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” The momo crowd is aggressively buying stocks on this clarification in the statement.
For anyone who has been deeply studying what the Fed has been saying, the clarification in the statement is simply a natural progression. The Fed started from an interest rate of zero. Interest rates have gone up significantly. Who would have not expected the Fed to not take into account the cumulative impact of interest rate hikes?
- The chart shows that smart money sold into the strength generated by momo crowd buying.
- Powell was forceful to explain in a way that made it obvious that momo gurus were wrong.
- From the second Interim Capsule:
Smart money is selling the strength generated by the momo crowd post Fed.
As we have previously shared with you, the first reaction to the Fed is wrong. This is often due to the momo crowd’s eagerness to buy aggressively. Powell starts his press conference by saying that the historical record argues against premature easing. We have been sharing with you Burns’s blunder.
As of this writing, yields are rising from the low after the Fed’s statement, the dollar is recovering, and the stock market is pulling back from its earlier gain. Nasdaq is negative. Let us see if momo buys the dip.
- Chair Powell said what we shared with you in advance. From Monday’s Morning Capsule:
If any of the four critical days described above produce even the slightest of positive data, momo buying will become extremely aggressive. For example, it is a matter of common sense that the Fed cannot keep on increasing rates by 75 basis points at every meeting. The Arora Report call is that the most probable terminal rate is around 5%. This implies that after a 75 basis point hike in this meeting, the Fed may hike by only 50 basis points in the next FOMC meeting. Remember the rates will still be going up and they are likely to stay up for awhile and Wall Street’s earnings estimates are too high. However, imagine what the momo crowd will do if on November 2nd the Fed were to say or imply that in the next meeting the rate hike will be data dependent – a perfectly logical thing to say. Imagine how momo gurus will twist this information and how aggressive momo buying will be.
- How spot on was the foregoing analysis? Chair Powell said, “Time has passed and we have raised interest rates by 375 basis points.”
- Powell said that the window for a soft landing has narrowed, but it is still possible. This is in line with the analysis that The Arora Report has been providing you.
- Fed Chair Powell said that the inflation picture has become more and more challenging. This is also in line with the analysis The Arora Report has been sharing with you.
- Investors need to be aware that now momo gurus have a bone to chew on from the Fed’s statement to try to run up the market. Previously, momo gurus were very successful simply by building castles in the sky without any substance. Now that they have a bone to chew on, they may become more persuasive.
- As of this writing, the market has given up all of its gains, the dollar has recovered, and yields are going higher.
- The Arora Report analysis is that the rates are likely to stay at 4% or higher for a long time unless there is a severe recession.
- The Fed funds futures contract shows a 39% probability of a 75 basis point hike in December.
- 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 VUD indicator is mixed.
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 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.
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.
The momo crowd money flows in gold are 🔒 since the Morning Capsule.
Smart money flows are 🔒 in gold since the Morning Capsule.
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
This post was published yesterday in The Arora Report paid services. Since then the Morning Capsule has had an update in the paid services.
Markets can generate substantial wealth for knowledgeable investors. 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 THE REMAINING 98% INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES, TAKE A FREE TRIAL TO PAID SERVICES.