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

Fig Leaves 

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

Note the following:

• The Jobs Report is highly disappointing in some respects but does show substantial progress in the economy.
  • Non-farm Private Payrolls came at 243K vs. 650K consensus.
  • Non-farm Payrolls came at 235K vs. 760 consensus. There appear to be several aberrant factors such as schools have not opened in some parts of the country.
  • The unemployment rate fell to 5.2% vs. 5.2% consensus.  Note that the prior unemployment rate was 5.4%. A drop of 0.2% is substantial progress.
  • The average hourly earnings rose 0.6% vs. 0.3% consensus. This equates to an annualized rate of 7.2% in wages.  This is a very strong inflationary number.  The government maintains that its target for inflation is 2% and any higher inflation is transitory.  Does anybody realistically think the employers are going to go to their workers in the near future and ask them to take wage cuts so that their raises are only 2% yearly because the government maintains inflation is transitory?
• One reason behind the disappointment is the lack of availability of workers, especially in low-skilled jobs.  Here is a question for Powell, “How does the Fed printing money to buy bonds of a rich company like Apple (AAPL) create extra workers for a mom and pop owned restaurant that is having trouble finding enough workers?” Here is a question for Biden, “How is recklessly borrowing more going to create new bus drivers?”
• The chart shows initial spike up on the jobs report on momo buying.
• The smart money sold the up spike.
• 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 green showing strong demand for stocks in the wake of the bad jobs report.
• Smart money selling has stopped the market from rising as of this writing but the momo buying is aggressive.

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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 🔒 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.  This is the reverse of the expected behavior. The expected behavior of bonds on a bad jobs report was interest to tick down and bonds to tick up.  The reason for the opposite move is concern about the Fed policies.

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 $1826, silver futures are at $24.41, and oil futures are at $70.48.

S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400, and 4318.

DJIA futures are up 14 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.

MOTHER OF ALL NUMBERS AHEAD – STOCK MARKET POSITIONED TO PROFIT FROM BAD NEWS

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

Pay Attention To Positioning

Please click here for a chart of semiconductor ETF (SMH).

Note the following:

• The jobs report is known as the mother of all numbers because of the attention investors and Federal Reserve pay to this report.
• The report will be released tomorrow at 8:30 am ET.  We have been sharing with you that it is important for investors to pay attention to stock market positioning. When events happen contrary to the positioning, violent moves in the stock market occur.
• The stock market is positioned for bad news tomorrow – a headline number much weaker than the consensus.  The consensus is 800K new jobs created.
• The thinking is that if the number is weak, it will give Powell a fig leaf to continue money printing at the rate of $120 billion a month without a taper.  Of course, you already know that part of the air that is inflating the stock market is money printing.
• If the jobs report is strong, such as a million new jobs created, the Fed will find itself boxed to announce a taper at the upcoming FOMC meeting September 21 – 22.
• There are always cross currents in the stock market. Signs of caution among non-momo investors are everywhere.
• The chart shows a sign of caution.  We have been sharing with you that semiconductors are a leading sector and often give a good indication for the future of the stock market.
• The chart shows the breakout.
• In contrast to Nasdaq 100 (QQQ), the chart shows that the breakout in semiconductors appears to be failing going into the jobs report.

Jobless Claims

The Jobless Claims report is a leading indicator and carries heavy weight in our models.  Please see 10 crucial inputs to ZYX Asset Allocation Model.

Initial Jobless Claims came at 340K vs. 348K consensus.

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 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 $1814, silver futures are at $24.16, and oil futures are at $69.20.

S&P 500 futures resistance levels are 4600 and 4900: support levels are 4460, 4400, and 4318.

DJIA futures are up 113 points.

MOMO LOVES WEAK ADP BUT IGNORES PRICE PRESSURES

September 1, 2021

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

Momo Picks And Chooses

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

Note the following:

• The chart shows that QQQ continues to march higher after the breakout.
• RSI on the chart shows that the market is now overbought.  Overbought markets tend to be vulnerable to the downside for the short term.
• Today is the first day of the month. Blind money is pouring into Wall Street.  Blind money is the money that comes in every month irrespective of market conditions without any analysis.  Typically the blind money gets invested in the afternoon.
• Market professionals know this and front-run it in the morning.

ADP

ADP is the largest private payroll processor in the country.  It uses its data to give a glimpse of the employment change before the official jobs report that is released at 8:30 am on Friday.

ADP came at 374K vs. 660K consensus.  This is a very weak number.  The momo crowd is loving it and aggressively buying stocks on this weak number.  The reasoning is that if the Friday number is weak, it will give a fig leaf to Powell to not taper and continue excessive money printing as well as to the politicians to borrow more.

Consumer Confidence

The consumer confidence dipped to 113.8 vs. 122 consensus.

The consumer, especially the low-income group, is getting concerned about rising prices.  The stock market is ignoring the data because the government is telling them that there is no inflation and whatever inflation there is, it is transitory.

See also  BUYING IN THE STOCK MARKET ON TAMER PPI AND ECB SIGNAL

Social Security

The government is planning to increase social security payments by as high as 6.2% due to inflation.  In prior years social security increases have been less than 2%.  At the same time, the government is telling investors that inflation is transitory.

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 showed a draw of 4.045M barrels vs. consensus of a draw of 2.833M barrels.

There is a critical OPEC meeting today.  There is concern that OPEC will increase production more than the prior plan of increasing production by 400K barrels per day.

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 $1821, silver futures are at $24.17, and oil futures are at $68.00.

S&P 500 futures resistance levels are 4600  and 4900: support levels are 4460, 4400, and 4318.

DJIA futures are up 37 points.

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STOCK MARKET GENERALS MARCH ON LEAVING THE SOLDIERS BEHIND

August 31, 2021

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

Generals Leave Soldiers Behind

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

Note the following:

• QQQ is dominated by large-cap tech stocks such as AAPL, AMZN, GOOG, MSFT, and FB.  QQQ is cap-weighted.
• The chart shows that for the period shown, QQQ has moved up 14.12%.  Equal weighted QQQ (QQEW) has moved up only 10.04%.
• The chart shows that S&P 500 ETF (SPY) has moved up 7.76% but equal-weighted S&P 500 ETF (RSP) moved up 3.11%.
• QQQ represents the generals in the battle between the bulls and the bears.  RSP represents the soldiers.
• RSP is lagging QQQ by 11%.  Imagine a battlefield where generals are running fast and running ahead while soldiers have fallen way behind.
• The foregoing represents another aspect of risk that the momo crowd is ignoring.

Consumer Confidence

The Consumer Confidence number will be released at 10:00 am ET.  The recent data from the University of Michigan has shown that consumer confidence is weakening.  The new data has the potential to move the markets.  Expectations are for the number to come at around 122.

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 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 $1812, silver futures are at $24.10, and oil futures are $68.56.

S&P 500 futures resistance levels are 4600  and 4900: support levels are 4460, 4400, and 4318.

DJIA futures are down 14 points.

SHOULD INVESTORS ADJUST PROTECTION BANDS AFTER POWELL IGNORES THE DATA

August 30, 2021

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

Adjusting Protection Bands

Please click here for a chart of the Federal Reserve’s balance sheet.

Note the following:

• The expectations in some non-momo circles were that Powell would finally wake up to the reality of the hard data and announce a taper in his Jackson Hole speech.  The momo crowd on the other hand believed that Powell would continue his ways of excessive money printing and ignore the data.
• Powell did not announce taper.
• What Powell does is critical to the stock market because money printing is a part of the air that is inflating the stock market bubble.
• Taper does not mean that the Fed will stop money printing.  It simply means that the Fed will reduce money printing by a tiny amount such as $10 billion per month.  In this scenario, the Fed’s balance sheet will still continue to grow.
• In plain English, the Federal Reserve’s balance sheet is a fancy way of saying money printing.
• Note from the chart that in 2008 the Federal Reserve’s balance sheet stood at $909.982 billion.
• The chart shows that the balance sheet now stands at $8.257 trillion.
• Note from the chart the recent rapid rise in the Federal Reserve’s balance sheet.
• The Federal Reserve is increasing its balance sheet by printing $120 billion of new money each month.
• The Fed started this emergency policy when the country was locked down and there was no vaccine. Since then, the stock market has doubled, house prices have skyrocketed, the number of open jobs is greater than the number of unemployed and the economic data that we share with you in the Morning Capsules has been the strongest in decades. Yet, the Fed has refused to change its emergency policy.
• Powell has been wrong about every critical projection that he made to justify continued excessive money printing.
• Here are the key considerations about investors adjusting protection bands.
  • If Powell’s speech was the only consideration, it would make sense to reduce cash and hedges to buy more stocks.
  • The next jobs report will be released on September 3.  If the number is strong, there will be pressure on the Fed to announce taper at the next FOMC meeting on September 22.
  • September is historically the weakest month of the year.
  • Stock market crashes tend to happen in October.
  • The purpose of protection bands is to protect long-term positions.
  • The tactical short-term positions are grouped with cash.
  • The Fed is behind the curve. Sooner or later they will have to catch up and start tapering.
  • It is worth repeating that even with tapering, the Fed will continue to print excessive amounts of money.
  • With its asset purchases, the Fed has totally suppressed volatility in some fixed income markets. Even though the taper amount will be small, the Fed may not be able to suppress volatility in fixed income markets after the taper starts. The volatility from fixed income may creep into the stock market.
  • Based on the foregoing, there is no change to the protection bands at this time until September 3.

See also  POWELL SHIFTS BUT DOES NOT ADMIT HE WAS WRONG, OPPORTUNITY IN AI DRIVEN SEMICONDUCTOR CHIP EQUIPMENT MAKER

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. Smart money is 🔒.

For longer-term, please see gold and silver ratings.

Oil

95% of the crude oil production in the Gulf of Mexico is shut down due to Ida.

The momo crowd is 🔒oil. 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 $1817, silver futures are at $24.20, and oil futures are $68.76.

S&P 500 futures resistance levels are 4600  and 4900: support levels are 4460, 4400 and 4318.

DJIA futures are up 25 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.