STOCKS RECOVER AS BIDEN SHIFTS FROM HIS PROMISE TO A SLAP ON THE WRIST

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

Slap On The Wrist

Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark for the stock market index (SPX).

Note the following:

Biden had promised severe sanctions against Russia.

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In the Morning Capsule, we shared with you that the market had recovered its Russia-related losses on speculation that there may not be a full-scale invasion.
The chart shows that after the regular market opened, stocks were sold in anticipation of Biden imposing severe sanctions on Russia. It was announced that Biden would impose such sanctions at 1:00 pm. Biden ran late.
In the Morning Capsule we wrote:

The U. S. has threatened to impose the most severe sanctions. However, in The Arora Report’s analysis, the U. S. may consider not imposing the most severe sanctions at this time because imposing the most severe sanctions at this time will remove the deterrent for Russia to launch a full-scale invasion.

It turns out our call was spot on and Biden chose to not impose severe sanctions.
Considering that Russia has been preparing for eight years to become desensitized to the sanctions, the sanctions Biden imposed amount to a slap on the wrist. For next level information on Russia’s preparation, please listen to the podcast titled, War: Stocks, Bonds, Gold, Oil, and Bitcoin.
The chart shows that stocks started recovering after Biden imposed weak sanctions.
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 chart shows the VUD indicator was orange leading to Biden’s sanctions on the fear of severe sanctions.
The chart shows the VUD indicator turned solid green indicating net demand for stocks when Biden imposed weak sanctions.
A notable feature of the trading today is a selloff in oil stocks such as DVN and OXY as well as a selloff in material stocks such as AA. Both oil and material sectors are supposed to benefit from the Russian conflict. Stocks in both sectors opened with significant gap ups on momo crowd buying. Smart money slammed the momo crowd with heavy selling and most of these stocks are down significantly from the highs as of this writing. How does it make sense that smart money sold precisely the stocks that are supposed to benefit from the Russian conflict? We are receiving a large number of emails asking this question, especially from money managers who bought these stocks at the open and are now sitting on major losses. For answers, please listen to the podcast Market Mechanics: Positioning

Money Flows

The momo crowd money flows since the Morning Capsule were 🔒 (To see the locked content, please take a 30 day free trial) most of the day but are positive as of this writing.

Smart money flows since the Morning Capsule were 🔒 in the morning, turned 🔒 near the lows, and as the market started rallying they turned 🔒.

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 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.

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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Nibbling

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This post was published yesterday in The Arora Report paid services. Since then the Morning Capsule has had an update in the paid services.

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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.