WEEKLY STOCK MARKET DIGEST: SMART MONEY IN THE STOCK MARKET WORRIED – NEW BIDEN FREE MONEY STARTS

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.’

RED HOT RETAIL SALES SHOW POWELL AND BIDEN MONEY PUMP WORKING

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

Money Pump

Please click here for a chart of retail sales.

Note the following:

  • The U. S. economy is 70% consumer-based. For this reason, prudent investors pay special attention to retail sales.
  • As shown on the chart, June Retail Sales came at +0.6% vs. consensus of -0.6%.
  • Automotive sales are very volatile. For this reason, it is also important to look at Retail Sales Ex-auto. Retails Sales Ex-auto came at 1.3% vs. 0.3% consensus.
  • Take a look at the chart and compare the recent numbers with pre-pandemic numbers.
  • Retail sales are red hot.
  • Of concern is that inventories are falling and now stand at very low levels.  When inventories are low, prices can go up.  Herein lies the concern about inflation.
  • The Fed has admitted that they were wrong about the magnitude of inflation.
  • The Fed has admitted that they were wrong about the duration of inflation. Not long ago the Fed was saying that inflation would be only for two to three months.  Now they are talking about nine months.
  • In spite of the Fed clearly being wrong, the momo crowd continues with their blind faith in the Fed and Biden that they will continue to pump money and the stock market bubble will continue to become bigger.

Risk Appetite 

Treasury bonds are considered safe and act as a benchmark.  The premium investors demand to compensate for the risk of junk bonds has fallen close to all-time lows.  This indicates that investors have an appetite to take very high risks without commensurate rewards. Typically this happens closer to market peaks.  In this context, the timing is not precise and it can be off by a year.  For long-term positions, investors should pay attention to the spread between Treasuries and junk bonds.

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.

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 $1824, silver futures are at $26.14, and oil futures are $71.76.

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

DJIA futures are up 87 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.

MORE NEW FREE MONEY STARTS FLOWING TODAY

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

More New Free Money

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

Note the following:

  • The chart shows that in the very, very short term, the market is losing momentum. However, large-cap tech stocks are maintaining their momentum.
  • The chart shows that RSI has rolled over.
  • No worries for the stock market bulls – new free money starts flowing today.
  • The new free money is in the form of a child tax credit. Over 35 million families will receive the new child tax credit checks.
  • Unlike the past free stimulus payments, this free money will flow in every month.
  • The free money is up to $300 per child for those making up to $150,000 per year.
  • The new child tax credit for those who really need it is a good thing.  However, this child tax credit is not targeted for those who really needed it.
  • A substantial portion of this tax credit will flow into the following:
    • Some of the money will flow into the stock market. Highly speculative stocks and meme stocks will likely be big beneficiaries.
    • In keeping with the past pattern, some of the money will flow into cryptocurrencies such as dogecoin.
    • Some of the money will flow in to buy goods such as couches and TVs.  Most of the goods bought will be made in China.
  • So far, the biggest beneficiary of our government borrowing heavily and giving free money to those who do not need it has been China.  The portion of free money that is spent on buying goods made in China is making the Chinese richer.
  • The momo crowd is loving these policies and continues to aggressively buy stocks.
  • Powell will testify before the Senate today.  Powell is likely to maintain that inflation will be transitory and will justify printing $120 billion per month including $40 billion to buy mortgages to stop house prices from crashing at a time when house prices are rising at the fastest pace in recent history.  Do you see anything wrong with this policy?
  • Smart money is concerned about borrowing for the new free money and Powell’s intransigence.  Smart money continues to sell into the strength. It is worth a reminder that smart money holds very large equity positions. Smart money is simply trimming at the edges and slowly increasing cash holdings. You can follow along with smart money by paying careful attention to ‘Protection Bands and What To Do Now?’ section below.

Jobless Claims

Initial Jobless Claims came at 360K vs. 360K consensus.

Industrial Production

Industrial Production came at 0.4% vs. 0.7% consensus.

Capacity Utilization came at 75.4% vs. 75.6% 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 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 $1826, silver futures are at $26.40, and oil futures are $72.07.

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

DJIA futures are down 151 points.

HOTTER PPI IS OF CONCERN BUT WILL POWELL AND BIDEN IGNORE THE DATA?

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

Hot PPI

Please click here for a chart of the Producer Price Index (PPI).

Note the following:

  • Producer Price Index (PPI) measures inflation at the producer level.  When PPI rises companies can either pass it on to consumers or their margins shrink.  If the margins shrink, in a sane world, that is bad news for stocks.
  • Yesterday we shared with you the CPI was significantly hotter than expected.
  • Take a minute and ponder the chart of PPI both for its magnitude and how quickly it is rising.
  • Core PPI came at 1.0% vs. 0.5% consensus.
  • The Headline PPI came at 1.0% vs. 0.6% consensus.   This number indicates that inflation is rising much faster than analysts expected.
  • How are our leaders in Washington responding to higher inflation numbers?
  • Powell is testifying before Congress today and tomorrow.  In his prepared testimony, Powell acknowledges that inflation is running higher than the Fed expected but the Fed is just going to ignore the data and do nothing.
  • Democrats have unveiled a massive $3.5 trillion budget with a lot of free goodies for a majority of their constituents – the extent of the massive spending and free goodies are significantly more than seen in a generation.
  • The momo crowd is loving the news – massive government spending and the Fed willing to continue to print money in the face of data that shows the Fed policy is wrong – what can get better than more air in the stock market bubble?

Marijuana

Schumer will propose today federal legislation to decriminalize marijuana. Marijuana bulls are getting excited and are predicting full federal legalization of marijuana in the next two years.

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 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

Saudi Arabia and UAE have reached an agreement that will allow UAE to pump more oil. The news is triggering significant buying in oil.

API reported a draw of 4.079M barrels vs. consensus of a draw of 4.333M barrels.

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 $1830, silver futures are at $26.45, and oil futures are $75.04.

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

DJIA futures are up 89 points.

HOTTER NEW DATA HAS POTENTIAL TO HURT THE STOCK MARKET

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

Hotter CPI

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

Note the following:

  • June Core Consumer Price Index came at 0.9% vs. 0.5% consensus.The headline CPI also came at 0.9% vs. 0.5% consensus.
  • The data indicate that inflation is running much hotter than the consensus.
  • For investors, it is important to take a look at CPI over a long term.  This is the reason the chart shows CPI over the last 20 years.
  • Note from the chart the latest spike in CPI.
  • Also, note from the chart that the CPI now has roughly reached the same level as it reached at the time of the stock market crash in 2008. During the 2008 crash, most portfolios invested in blue chips lost over one-half of their value.  Those invested in speculative stocks lost a lot more.The Arora Report subscribers were in cash and fully hedged before the crash.  Then using inverse ETFs, The Arora Report subscribers generated a return of over 40% when the stock market was cut in half.
  • The foregoing is just one important observation.  In 2008, the cause of the crash was the housing market bubble.  Now many conditions are different.
  • In 2008, the Fed was not pumping air into the stock market like they are now. Also, the government was not borrowing recklessly like they are now. The momo crowd was not in control like they are now.
  • This report will put pressure on the Fed to start tapering.  In plain English,  tapering means reducing money printing.  Investors need to keep upfront and center that the Fed is buying $40 billion a month of mortgages on the pretext of preventing house prices from crashing.  Unless you have been under a rock, you already know that house prices have been rising at the fastest pace in recent history.  How does the Fed printing money to buy $40 billion of mortgages a month to support house prices even make sense?
  • Nobody including the Fed has been able to answer the question posed above. Yet, the Fed persists with the policy the was made when the country was locked down, the stock market was crashing and there was no vaccine.
  • Anybody who is objective already knows that a big reason behind the stock market rise has been money printing and other Fed policies. If the Fed were to become objective and reduce pumping air into the stock market, this will hurt the stock market.
  • The Fed will likely continue to claim 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

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 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 $1802, silver futures are at $26.05, and oil futures are $73.70.

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

DJIA futures are down 36 points.

HERE IS WHAT INVESTORS NEED TO KNOW ABOUT COMING STOCK MARKET MOVES

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

Here Is What Is Ahead

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

Note the following:

  • The chart shows the stock market is extended.
  • The chart shows the two major support zones.
  • The signal to increase cash was given not based on one day but looking forward to the entire third quarter.
  • Jackson Hole Economic Symposium is scheduled for August 26 – 28.  The symposium is sponsored by the Federal Reserve Bank of Kansas City. There is a tradition of the Fed announcing policy at this symposium.
  • The prevailing wisdom is that the Fed may announce its plans for tapering at Jackson Hole.
  • Since the market is driven by money printing, a reduction in money printing may have a negative impact on the stock market.
  • The third quarter tends to be the weakest quarter of the year.
  • September tends to be the weakest month of the year.
  • Stock market crashes tend to occur in October.
  • The earnings season is ahead.
  • Consensus estimates of the earnings are based on estimates published by analysts.  The market does not move based on consensus estimates that are widely published.  The market moves based on whisper numbers. Whisper numbers are the ones that analysts share privately with their best clients.
  • Whisper numbers are significantly higher than the consensus numbers for the upcoming earnings.
  • Companies are likely to beat the consensus estimates.  Will they beat the higher whisper numbers? This is a risk factor.
  • Investors are conditioned that the market goes up on bad virus news.  The worse the virus news, the more money printing by the Fed and more borrowing by Biden.  This market is driven by money printing and borrowing.
  • Going forward, the response to virus variants may not be positive like it has been in the past.
  • The momo crowd believes that stocks only go higher and by their own buying they can push stocks higher and higher. If the momo crowd continues to be as aggressive as they have been, the traditional weakness because of the factors described above may be tempered.
  • The market may start paying attention to antitrust moves against big tech stocks.

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 and bonds are range-bound.

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 $1803, silver futures are at $26.07, and oil futures are $73.43.

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

DJIA futures are down 108 points.

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 2% of the content from our paid services. …TO RECEIVE REMAINING 98% INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES,
TAKE A FREE TRIAL TO PAID SERVICES.

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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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