By Nigam Arora
Editor’s note: This post was published yesterday in The Arora Report paid feeds as an Afternoon Capsule.
To gain an edge, this is what you need to know now.
December Not A Done Deal
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 when the FOMC interest rate decision was announced. As expected, the Fed cut interest rates by 25 bps.
- The chart shows the initial negative stock market reaction to Fed Chair Powell’s press conference as Fed Chair Powell threw cold water on moro gurus’ narrative.
- Here are the key points from Fed Chair Powell:
- The stock market should not assume another interest rate cut is coming in December.
- The outlook has not changed much since September.
- The government shutdown’s impact on economic activity should reverse after it ends.
- Risks to inflation are to the upside, and risks to employment are to the downside.
- The Fed sees gradual cooling in the labor market, and it “gives some comfort.”
- Disinflation on services is continuing.
- Inflation on goods is increasing due to tariffs. At this time, it is unclear if goods inflation is persistent or short lived.
- Aside from tariffs, inflation is not far from the 2% goal.
- Balance sheet runoff will all go to Treasuries.
- The Fed is slowly moving towards a shorter duration for its balance sheet.
- Powell does not think AI data center investments are interest rate sensitive.
- Investors should note, two voting FOMC members dissented:
- Miran voted for a 50 bps cut.
- Schmid voted for no rate cut.
- The VUD indicator is the most sensitive measure of net supply and demand in real-time. The orange represents net supply and the green represents net demand.
- The VUD indicator today is mixed.
Potential After Hour Signals
Signals may be given after hours based on the news that will be released after hours. The best trades often occur outside regular hours. The reason is that almost all earnings are outside regular hours.
Buy signals will be in ZYX Buy. Short signals will be in ZYX Short.
Here is the list:
ALGN
BOOT
CMG
CP
CVNA
DVA
EBAY
ETD
GH
GOOG
META
MGM
MSFT
NTGR
PI
PSA
SBUX
TDOC
UDMY
WOLF
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 Members
Smart money often sells into the strength generated by momo crowd buying and buys into the weakness generated by momo crowd selling. Over a long period of time, investors come out ahead by adopting smart money’s ways. The exception is in a raging bull market – for very, very short term trades, consider following the momo crowd and not smart money.
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.
Close
There appear to be *** 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.
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
The upside momentum in the stock market is strong, and the sentiment is extremely positive. However, the stock market is overbought and priced for perfection. The market is now entering a strong seasonality period. Expect money managers to chase the market. The stock market depends, to a large degree, on what President Trump does, mega cap earnings that are ahead, the results of the Trump Xi meeting.
Consider giving priority to tactical positions over strategic positions. Consider holding existing strategic positions. It is fine to add to strategic positions when they dip in the buy zone. Pay attention to individual posts if a position is marked as very long term, long term, or short term. If there is no mention of timeframe, the default is medium term. Please see Trade Management Guidelines to see definitions of timeframes.
Nibbling
Consider not nibbling at this time.
Nibbling refers to buying very small quantities, often in existing long-term positions with the intention of exiting these additions in the short term. It is similar to trade around positions but without specific signals.
The Afternoon Capsule is not published daily but only when conditions warrant it. The content below is unchanged and is to be used for reference as needed.
Sophistication
The character of the market has changed. Unfortunately, the last decade was an exception to the rule. Take a look at the chart of the US market for a 15 year period from 1967 – 1982 — the stock market made no progress.
Many investors are spoiled due to the decade-long bull market. A large number of investors believe that all they have to do is to buy and hold forever. Investors who do not believe in buy and hold forever say it is very simple – be all in or be all out. Both beliefs are wrong.
As the market turns volatile, many investors who do not understand the true nature of the market are jumping in with both feet without appreciating the risks, while other investors are getting whipsawed.
Risk and reward are two sides to the coin. It is important to consider both.
For your reference, we are pasting the following from your Getting A Running Start Guide,
Everything should be made as simple as possible but not simpler.
Albert Einstein
Strategic Vs. Tactical
All investors should consider bringing more sophistication to their investing and trading. It is important to clearly understand the difference between strategic and tactical calls. For your convenience, a prior post is pasted below.
We welcome your comments and questions. The law does not allow us to answer them individually. However, when a large number of subscribers ask similar questions, a post is done – typically starting with Ask Arora.
Strategy
Strategy defines medium to long term plan to achieve the highest risk-adjusted returns.
Here are some examples of strategic calls for illustration only.
- It is late cycle. Portfolios have to be organized for the late-cycle. Risks are much higher in the late-cycle compared to when a bull market is in an early stage.
- The world is awash in debt. The sovereign debt owed by governments and corporate debt owed by zombie corporations has dramatically increased. It is a bubble that is getting bigger waiting for a pin to prick it.
- Valuations are expensive.
- Fed policy is shifting.
- Earnings are rising.
Tactics
Tactics are small adjustments within the strategy to further enhance risk-adjusted returns.
Here are some examples of tactical calls.
- Weak hands temporarily washed out.
- Overbought condition temporarily relieved.
- Sentiment backing off from almost extreme bullish levels.
If You Could Pick Only One
We recognize that all investors have individual preferences. If you could pick only one, consider focusing on the strategy. Never focus only on tactics at the expense of strategy.
Cash And Hedges
We provide a range for cash and hedges. Most investors would be in the middle of the ranges. As such, they would not need to make any change. When a change is given only at the edges of the ranges, only the most active investors need to make a change.
Arora’s 12th Law
Arora’s 12th Law is applicable here: To be successful at investing and trading, flow with the new data, and stay nimble.
Bullet Proof Your Portfolio And Increase Your Returns
We consistently see that private investors, money managers, and investment advisors who have attended the Bullet Proof Your Portfolio and Increase Your Returns seminar do significantly better compared to those who have not attended the seminar.
Here are the four main reasons why this consistently happens to investors who attend the seminar:
- They start understanding the true nature of the markets.
- Develop a better framework to handle the true nature of the market.
- Tend to act with more conviction and with more comfort.
- Tend to develop better control over their emotions.
To take a free 30-day trial to paid services to gain access to more opportunities, please click here.
This post was just published yesterday on ZYX Buy Change Alert.
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 1% of the content from our paid services. …TO RECEIVE REMAINING 99%, INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES AND SIGNALS IN REAL TIME, TAKE A FREE
TRIAL TO PAID SERVICES.
The Arora Report is one of the only major global investment newsletters that does not employ a single salesperson—because it does not need to. While competitors rely on high-pressure sales tactics, The Arora Report grows purely through results, with satisfied members recommending it to their family and friends.
Join the service that investors trust the most and recommend to family and friends.
Please click here to take advantage of a FREE 30 day trial.
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.
