WEEKLY STOCK MARKET DIGEST: MARKET DOES NOT BELIEVE “POSITIVE DEVELOPMENTS” BUT THIS CHART TELLS THE REAL STORY

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.’

MARKET DOES NOT BELIEVE “POSITIVE DEVELOPMENTS” BUT THIS CHART TELLS THE REAL STORY

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

Positive Developments

Please click here for a chart of oil futures (CL_F.)

Note the following:

  • In the early morning, The Arora Report published an Interim Capsule to give you an extremely time sensitive heads up within minutes of the development. We wrote,

Putin apparently said, “There are certain positive developments.”  It is conceivable that Putin is misleading and buying time.  Nonetheless, the market is very oversold, and if Putin is being truthful, there is potential for a sharp rally.

  • The Interim Capsule also made a call to deploy cash and reduce hedges.  Please read the Interim Capsule for details.
  • So far the market does not believe that there is a positive development.  After all, Putin has been bluffing all along and misleading. Many leaders in the West are upset with Putin for misleading them. However, prudent investors know that deception is common in war.
  • Investors should not rely on what is being said but judiciously pick data points that show what is really happening.
  • The chart shows the most important data point. The price of oil shown on the chart has fallen from a high of $130 to $105.63 as the situation in Ukraine continues to get worse.  Irrespective of what is being said and the headlines, let the price of oil be one of your guides.
  • The U.S. intelligence clearly does not believe that there is a positive development. President Biden will speak at 10:15 am ET and will apparently revoke normal trade relations with Russia.  
  • At this time, it is extremely important for investors to start with Arora’s Second Law of Investing and Trading:

Nobody knows with certainty what is going to happen next in the markets.

  • Follow the Arora’s Second Law with Arora’s Third Law:

Making investing and trading decisions based on probabilities is the only realistic and profitable approach.

  • On Monday, in the Morning Capsule we provided you five scenarios with probabilities.
  • An off ramp is found for Putin to declare victory.

The probability is 35%

Russia meets its objectives.

The probability is 15%.

Fighting continues at or near the present level.

The probability is 15%.

Fighting accelerates.

The probability is 25%.

Other scenarios.

The probability is 10%.

  • The probability of the first scenario given above has now jumped to 45%. 
  • To learn about Arora’s 30 laws and scenario analysis, consider attending the Bulletproof Seminar.
  • 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.
  • Note that the VUD indicator is positive, indicating strong net demand for oil. This indicates that the big players believe that the oil price drop is a false move. 

Buying When There Is Blood In The Streets

Many investors believe in buying when there is blood in the streets – this is how they have become extremely wealthy. We are receiving a large number of requests about buying Russian stocks and ETFs. For a typical American citizen, it is a very difficult task at this time.  However, there is a new idea to partially accomplish what you want to do.  ‘A NEW IDEA’ post has been published in ZYX Emerging with buy zone.

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 🔒 in the early trade.

Gold

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

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

Oil

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

For longer-term, please see oil ratings.

Bitcoin

There is nothing remarkable about bitcoin trading today.

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 $1966, silver futures are at $25.87, and oil futures are $106.37.

S&P 500 futures resistance levels are 4318, 4400 and 4460: support levels are 4200, 4000 and 3950.

 futures are up 221 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.

 

INFLATION AT FOUR DECADE HIGH, ECB SURPRISE, TURKEY TALKS FAIL

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

No Man’s Land

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:

  • There is plenty of market moving news, but the chart shows that the market is stuck in no man’s land.
  • Inflation is running at a four decade high.
    • The chart shows when CPI data was released.
    • The chart shows that there was a slight rally on relief that CPI numbers were below whisper numbers.
    • Whisper numbers were running higher than the consensus.
    • CPI came at 0.8% vs. 0.8% consensus.
    • Core CPI came at 0.5% vs. 0.5% consensus.
  • The last time inflation was this high was in 1982, and  was under 1000.  
  • There is a disappointment in the stock market that talks in Turkey failed between the foreign ministers of Ukraine and Russia.
    • Ukraine appears to be ready to compromise but Russia still wants a surrender.
  • The chart shows that the market is at the bottom band of the support/resistance zone.
  • The chart shows that the volume during yesterday’s rally was relatively low. This is a negative.
  • The following are indicative of an inflection point.
    • Yesterday, commodities had the biggest one day drop since 2008.  
    • Yesterday, S&P 500 rose 2.6% – the highest gain since June 2020.
    • On Monday, S&P 500 fell 2.9% – the worst drop since October 2020.

ECB Surprise

Here are the results of the European Central Bank (ECB) meeting.

  • ECB surprised with a plan to stop net purchases in the third quarter, sooner than expected. In plain English, ECB will stop money printing.
  • Monthly net purchases will be 40 billions euros in April, 30 billion euros in May, and 20 billion euros in June.
  • Interest rates have been left unchanged.

Jobless Claims

Initial claims came at 227K vs. 220K consensus.

Momo Crowd And Smart Money In Stocks

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

Gold

Gold attempted a rally on CPI data, but the rally appears to be failing as of this writing.

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

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

Oil

Oil is attempting a rally on the failure of talks in Turkey. As of this writing, the rally appears to be failing.

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

For longer-term, please see oil ratings.

Bitcoin

After large gains yesterday, there is 🔒 in bitcoin. Bitcoin continues to be highly correlated with speculative stocks and continues to not act as a hedge.

Markets

Our very, very short-term early stock market indicator is negative but can quickly reverse on rumors. 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 $2003, silver futures are at $26.21, and oil futures are $114.55.

S&P 500 futures resistance levels are 4318, 4400 and 4460: support levels are 4200, 4000 and 3950.

 futures are down 415 points.

 

HEAVY FOMO BUYING AHEAD OF KEY DATA THAT COULD BE UGLY, NEGATIVE SAUDI

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

Key Data Ahead

Please click here for a chart of the Consumer Price Index (CPI)

Note the following:

  • This morning there is heavy buying in stocks.
  • The buying is coming ahead of key Consumer Price Index (CPI) data that will be released tomorrow morning at 8:30am ET.
  • The chart shows CPI data going back five years. The data is a monthly change.
  • The Fed’s target has been 2% per year or 0.166% per month.
  • The chart shows that inflation is running far ahead of the Fed’s target.
  • The consensus is for CPI to come at 0.8%. This is an annualized rate of inflation running at 9.6%.
  • The whisper numbers are for an annualized rate of inflation over 10%.
  • Consensus for Core CPI is 0.5%.
  • The heavy buying in stocks is mostly by the momo crowd. The momo crowd is heavily conditioned to buy the dip. Right now, they appear to be acting out of FOMO (fear of missing out).
  • On the Ukraine front, there are two pieces of news that should have driven the market lower. However, as FOMO has set in in the early trade, Ukraine is being ignored for the time being.
    • Right now, the SWIFT ban is very limited. Russia has a number of ways to get around it. An effort has been underway to broaden the ban. The news is that Germany is resisting it.
    • Chernobyl has lost power. This threatens the cooling of radioactive materials and thus risks radioactive leakage.
  •  is being probed for obstruction of Congress for withholding information during an antitrust probe. This is a serious charge and would have normally led to selling in tech stocks but not today.
  • Money is flowing out of oil stocks, gold stocks, and other commodity stocks into tech stocks in the early trade.
  • In a very negative long term development for investors, Crown Prince Mohammed bin Salman of Saudi Arabia has reaffirmed his commitment to Russia despite Ukraine. There is also a report that Salman refused to take a call from Biden.  

Momo Crowd And Smart Money In Stocks

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

Gold

Money is flowing out of gold into stocks and bitcoin. Gold has fallen below $2000.

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

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

Oil

Money is flowing out of oil into stocks.

API came at a build of 2.811M barrels vs. consensus of 2.796M barrels.

 data will be released today at 10:30am ET.

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

For longer-term, please see oil ratings.

Bitcoin

Money is flowing out of gold into bitcoin. Bitcoin and cryptos are ripping hard on Biden signing a crypto executive order.  The order is benign.  The fears were of stricter regulation. Since the fears of stricter regulation are alleviated, the result is 🔒 of bitcoin.

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 $1993, silver futures are at $26.32, and oil futures are $117.13.

S&P 500 futures resistance levels are 4318, 4400 and 4460: support levels are 4200, 4000 and 3950.

 futures are up 531 points.

 

STOCK RALLY ATTEMPT DAMPENED BY BIDEN BAN, NICKEL SPIKES 250%

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

Rally Attempt

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:

  • There was significant buying in stocks in the pre market.
  • Selling came in on the news that Biden will announce a ban on Russian oil at 10:45 am ET.
  • The chart shows that so far the stock market has managed to stay above the low of the Russian attack news.  This is a positive.
  • The chart shows that RSI is diverging.  This is a positive.
  • The chart shows that the volume was relatively low on the drop.  This is a positive for the immediate time frame but a negative for the longer time frame.
  • VIX, after having spiked above 36, is at 35.41 as of this writing.  This is a positive.
    • Ideally, we would like to see  spiking above 40 and then pulling back to generate a buy signal.
  • Retests are historically common.  This is exactly what is happening now.  Here is the key question: Will the retest succeed or fail?
    • Bulls are seeing signs that the retest will be successful. They are taking a stand and buying right here.
    • Bears are seeing signs that the retest will fail, and the market will drop to the lower support zone shown on the chart. Bears are short selling.
  • Several positives are described above.  However, there are several negatives.
    • Total put call ratio was 0.92 yesterday.  This is a negative. For those wanting next-level information, please listen to the podcast on the subject.
    • Wall Street positioning is positive. For those wanting next-level information, please listen to the podcast.
    • The advancing declining volume does not indicate a bottom.
    • The number of advancing issues minus the number of declining issues does not indicate a bottom.
    • The sentiment does not indicate a bottom. Those wanting next-level information on sentiment, please listen to the podcast.
    • There is no capitulation.  This is a serious negative.
    • To be successful, investors should consider not being locked in a bullish or bearish opinion. Instead, stay in neutral and pay attention to the data as it comes. 
  • The only realistic way is for investors to consider the probabilities of the five scenarios discussed in yesterday’s Morning Capsule. 
  • All of the foregoing and numerous other complex factors are turned into actionable information in “Protection Bands And What To Do Now?” section of the Morning Capsule and “Buy Zones And Buy Now Ratings” section of the Afternoon Capsule.   

Nickel Up 250% In Two Days

Dislocations are beginning to occur at various places.  Nickel is an example.

Here are the key points.

  • Nickel use is increasing because of electric vehicles.
  • Russia is a big producer of nickel.
  • Nickel is primarily traded on the London Metal Exchange (LME).
  • A short squeeze carried nickel up 250% in two days.
  • The short squeeze was triggered by a speculation that the U.S. was considering banning Russian oil.
  • The .S. has specifically stated that it has no intention of banning Russian metals such as aluminum and nickel.
  • Xiang Guangda, a wealthy Chinese entrepreneur, has apparently suffered billions of dollars of losses on a short position in nickel.
  • Guangda is likely to make money on the other side – he controls Tsingshan Holding, the largest nickel producer in the world.

Momo Crowd And Smart Money In Stocks

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

Gold

Gold has decisively broken above the psychological resistance of $2000.  We will shortly update SIGNAL QUALITATIVE:   SUPPORT RESISTANCE ZONES AND MONEY FLOWS.

Keep in mind the following.

  • If the war in Ukraine continues or worsens, gold will continue to go up.
  • If there is a cease fire or a resolution, irrespective of all other factors, gold will likely fall.

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

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

Oil

Biden is about to announce sanctions on Russian oil.

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

For longer-term, please see oil ratings.

Bitcoin

The momo crowd is 🔒 bitcoin.  Bitcoin continues to behave like a risk asset and not as a hedge.

Markets

Our very, very short-term early stock market indicator is 🔒 because the market will move based on the details of Biden’s actions and other news.  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 $2023, silver futures are at $26.58, and oil futures are $124.06.

S&P 500 futures resistance levels are 4318, 4400 and 4460: support levels are 4000, 3950 and 3860.

 futures are down 3 points.

 

INVESTORS: PAY ATTENTION TO ARORA’S THIRD LAW TO NAVIGATE UKRAINE CRISIS

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

Navigating Ukraine Crisis

Please click here for a chart of S&P 500 futures (ES_F).

Note the following:

  • The chart illustrates why investors should set aside emotions and methods that do not work in this type of situation.
  • The chart shows a significant drop in stock futures on Sunday evening on potential Russian oil ban.
  • The chart shows when the media started focusing on planned talks in Turkey between Ukrainian and Russian foreign ministers.
  • The chart shows a strong move up in futures as the news of talks in Turkey spread.
  • The chart pattern in gold and oil has been the reverse of the pattern in stocks.
    • Initially gold and oil spiked on potential Russian oil ban.
    • As the news of talks in Turkey spread, gold and oil have given up a big part of the gains.
    • Investors who acted out of emotion or followed the news instead of looking ahead got whipsawed and lost money.
    • The foregoing pattern is also playing out on a longer timeframe.
  • 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 in stocks is mixed, indicating that neither net supply nor net demand is dominating as of this writing.
  • The VUD indicator in oil is mostly orange, indicating net supply is dominating as of this writing.
  • The VUD indicator in gold has been mostly green even as gold was pulling back. This indicates a strong net demand for gold.
  • Keep in mind that the VUD indicator is a short term indicator. It can quickly change. Having said that, studying the VUD indicator on an ongoing basis gives valuable insights for long term investing.
  • Start with Arora’s Second Law of Investing and Trading. Here is the Second Law:

Nobody knows with certainty what is going to happen next in the markets.

  • Investors should follow Arora’s Third Law of Investing and Trading. Here is the Third Law:

Making investing and trading decisions based on probabilities is the only realistic and profitable approach.

  • To learn all of Arora’s Thirty Laws, attend the Bulletproof Seminar.
  • Here are the scenarios.
    • An off ramp is found for Putin to declare victory.
      • The probability is 35%
    • Russia meets its objectives.
      • The probability is 15%.
    • Fighting continues at or near the present level.
      • The probability is 15%.
    • Fighting accelerates.
      • The probability is 25%.
    • Other scenarios.
      • The probability is 10%.

Momo Crowd And Smart Money In Stocks

The momo crowd was 🔒 stocks earlier but is now 🔒 stocks as of this writing in the early trade.  Smart money was 🔒 stocks earlier but is 🔒 stocks as of this writing in the early trade.

Gold

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

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

Oil

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

For longer-term, please see oil ratings.

Bitcoin

Bitcoin is acting like a risk asset similar to speculative stocks and not as a hedge.  Bitcoin was lower when stock futures were lower.  Bitcoin is rallying as stock futures rally.

Markets

Our very, very short-term early stock market indicator is 🔒 as the market will move on news related to the oil ban and peace talks.  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 $1980, silver futures are at $25.74, and oil futures are $117.44.

S&P 500 futures resistance levels are 4400, 4600 and 4713: support levels are 4200, 4000 and 3950.

futures are down 56 points.

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Nigam Arora

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

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.

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