SHORT SQUEEZE AND A NEW ECB MODEL ADD FUEL TO THE FIRE IGNITED BY HIT NEW MOMO GURUS’ NARRATIVE

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

Short Squeeze 

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 CPI was released.  Please see the Morning Capsule for details.
• The chart shows the initial selloff on the news of hotter than expected CPI.
• The momo gurus quickly turned the hot CPI number into a reason to buy stocks.  We previously shared with you in the Interim Capsule,

The narrative is that worse than expected inflation means inflation will peak sooner and the stock market will go up.

• We also shared with you in the Interim Capsule that in The Arora Report analysis the momo gurus’ new narrative is highly flawed.
• It is important to not fall victim to the myth that the momo gurus’ job is to do accurate analysis and help you make money.  Many investors do not realize that the momo gurus’ sole job is to run up the stock market.
• The chart shows that the momo gurus’ new narrative is a hit with investors.
• Two new developments are adding fuel to the fire ignited by momo gurus’ new hit narrative.
  • The first development is that ECB staff model is predicting an ECB terminal rate of 2.25% to control inflation.
    • 2.25% is less than expectations.
    • Prudent investors need to keep in mind this is the same staff that predicted there would be no inflation as a result of money printing.  This is also the same staff that predicted inflation would be transitory.  And finally, this is the same staff that predicted that inflation would not go as high as it has.
  • The momo gurus’ new narrative has triggered a vicious short squeeze.
    • Short sellers have been right in their call that CPI would be worse than expected, yet they have been caught off guard with the success of the momo gurus’ new narrative.
    • Shorts sellers who were taking aggressive short positions going into the CPI release are now feeling compelled to buy to cover.
    • Do you want to know why shorts are feeling compelled?  The reason is that to prosper, short sellers become highly disciplined to take losses when the market goes against them.  Now you have the answer.  If you want to learn more in depth, listen to the podcast titled “Short Selling: Generating Profits From Falling Prices.”  The podcast will be live shortly.
• We wrote in the Interim Capsule,

One problem that the cautious stance will face is that today’s price action, unless it reverses, will cause the followers of traditional technical analysis to start aggressively buying.

• Such technical buying has already started, pushing the stock market even higher.
• 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 mostly green, indicating net demand for stocks.
• To cut through the noise, just remember that CPI data today showed inflation is stickier than stock market bulls want you to believe.  Please read yesterday’s Afternoon Capsule about the Fed’s thinking – the data today shows that the Fed’s worst fears are coming true. The data today should be a source of concern and alarm for all prudent investors.    

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 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

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 buy 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

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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.