SPECTACULAR JOBS CREATION, TRUMP AND GEORGIA MAY GET IN THE WAY

STOCK MARKET FRONT RUNS ANOINTING BIDEN AS THE NEXT PRESIDENT EVEN THOUGH TRUMP HAS A PATH

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

Election

Here are the key points:

• There was no blue wave.
• There was a red wave in some areas of the country.
• Pollsters were wrong.
• The media was wrong.
• A vast majority of analysts were wrong.

The Good News

There is a lot of good news for The Arora Report subscribers based on what is known so far.

• Arora portfolios are almost perfectly positioned for what is likely emerging from the election.
• No big changes are likely needed for the portfolios.

Mistakes Avoided

Markets move fast, they are complex, emotions run high and there is too much information.  It is understandable why under these circumstances a large number of analysts made several mistakes — we can tell know with the benefit of hindsight.

With the benefit of hindsight, the good news for The Arora Report subscribers is that you avoided the mistakes that have been commonplace.

• Selling big tech stocks in entirety such as Amazon (AMZN), Google (GOOG), Facebook (FB) and Apple (AAPL) due to potential blue sweep and regulatory concerns.
• Selling stocks in entirety due to capital gains tax concerns.
• Exiting the stock market completely.
• Buying infrastructure stocks at the last minute anticipating a blue sweep.
• Buying marijuana stocks at the last minute at high prices in anticipation of a blue sweep.
• Buying Green Deal stocks right before the election.
• Aggressively selling Republican stocks right before the election.
• Positioning portfolios for a Trump landslide or a Biden landslide.
• Selling emerging market stocks.
• Short selling the dollar.
• Aggressively short selling stocks.

Two Charts

Please click here for a chart of Nasdaq futures (NQ_F).

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

Note the following:

• We understand that many investors are uncomfortable with futures. This is the reason we normally use charts of ETFs.
• The reason for using future charts is that they were trading all night.
• The first chart shows good news for tech early in the night.
• The first chart shows that tech stocks stayed strong throughout the night and the pullback was shallow.
• The VUD indicator is the most sensitive measure of net supply demand in stocks in real-time. The orange indicates net supply and the green indicates net demand.
• The first chart shows that net demand for stocks has increased as the morning has progressed.
• The second chart looks about the same as the first chart.  However, a closer examination shows that the demand for stocks is mostly focused on the tech stocks as of this writing.
• Infrastructure stocks are being sold in the early trade.
• Marijuana stocks are being sold in the early trade.
• Bank stocks that ran up on expectations of a blue sweep are being sold.
• Oil stocks are being bought.

More On The Election

We will be providing more analysis as appropriate.

Momo Crowd And Smart Money In Stocks

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

Gold

The momo crowd is 🔒 in 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 slightly 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 $1909, silver futures are at $24.13, and oil futures are $38.54.

S&P 500 futures resistance levels are 3420, 3460 and 3520: support levels are 3390, 3320 and 3278.

DJIA futures are up 46 points.

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

Frontrunning

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

Note the following:

• Wall Street is frontrunning the election. For newer subscribers, frontrunning is common and simply means buying ahead of an event.  Often the connotation is that those who are buying know the results of the event.
• We have been sharing with you the importance of understanding the positioning.  In yesterday’s Morning Capsule, Wall Street’s positioning for different scenarios was described in detail.
• As previously stated, Wall Street is positioned for Biden to win and the stock market to go up.
• The reasoning is that Biden will borrow more than Trump.  In this market, like it or not, the prevailing wisdom is that the more the borrowing, the higher the stock market.
• The chart shows that from a technical perspective, not a whole lot has changed in spite of the rally this week.
• The chart shows that even after the rally in the early trade, the market is below the all-important breakout line.

Risk

By now many of you may be asking, “What about the risks of buying before election results are known?”

This stock market is controlled by the momo crowd.  The momo crowd does not think in terms of risk.  In yesterday’s Morning Capsule, we shared with you that there are two risk events that Wall Street is not positioned for.

• Wall Street is not positioned for not knowing the results for a long time or a contested election.
• Wall Street is not positioned for Democrats winning the Senate.

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.

Marijuana

In yesterday’s Afternoon Capsule, we shared with you a chart of marijuana stock Canopy Growth (CGC).  Please click here for the chart.  For details, please read yesterday’s Afternoon Capsule.

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 $1907, silver futures are at $24.38, and oil futures are $38.17.

S&P 500 futures resistance levels are 3390, 3420 and 3460: support levels are 3320, 3278 and 3228.

DJIA futures are up 392 points.

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

Apolitical

My long time readers know that I am politically agnostic.  My sole job is to help investors. This post is not about politics but about investing.  It goes without saying that the election will have a major impact on investing.

The foregoing is important to help the readers read the post not through a political lens but through an investment lens, as hard as it may be for some readers.

It is important for investors to completely separate their politics from their investments to succeed.  Think of all those Republicans who missed out making money in the stock market during the Obama years and all those Democrats who missed out in the Trump years because they did not separate their politics from their investments.

Bold Calls

Over the years The Arora Report has made a large number of bold calls.  At the time of each call, the call went against the prevailing wisdom and hardly anybody else on Wall Street was on our side.

It is humbling that all of such calls have proven to be correct.

When it comes to politics, the two bold calls that have proven correct are the Trump election and Brexit vote of ‘Yes.’  At the time of these calls, almost everyone on Wall Street was on the other side.

The Process

The reasons for the success behind The Arora Report calls have been the following elements:

• Starting with a neutral position.
• Setting aside our own biases, prejudices and opinions before the analysis.
• Taking a wholesome view of the data including unconventional data.
• Using sophisticated algorithms.
• Connecting the dots.

2020 Polls

One has to be careful looking at the polls. Here are the key points:

• Many polls are not neutral but are designed specifically to give advantage to one side over the other.  Simply ask these pollsters where their funding comes from.
• Even the polls from credible organizations suffer from biases.
• The results of the polls often depend on how the question is asked.
• Based on the past data, it is clear that Trump supporters under poll.  Many Trump supporters are reluctant to admit to pollsters that they support Trump.
• 2016 election highlighted several deficiencies in the polling methodologies.  It appears that most of those deficiencies have not been corrected.

Four States

The president is decided by Electoral College and not by popular vote.  With the polarization of many states becoming solid blue or solid red, only a few swing states decide who wins.

This time Biden has many paths to win.  Trump has fewer paths.  Based on an analysis of the paths, only the following four states may matter.

• Florida
• Michigan
• Pennsylvania
• Wisconsin

In some scenarios, Arizona and North Carolina may become important.

If the foregoing was not jarring enough, in the end only about 20 counties within the states mentioned above will likely make the difference.

The Most Important State

Pennsylvania appears to be becoming the most important state.  Here are the key points:

• On average, Biden is leading by about 5 percentage points in the polls in Pennsylvania.
• Biden had a slip up in the last debate about fracking.
• Fracking supports about one million jobs in Pennsylvania.
• The large crowd that Trump drew in one of his rallies in Pennsylvania should be sending shivers down the spines of Democrats.
• The all-important black vote in and around Philadelphia does not seem to be enthusiastic about Biden.

Adjustments To The Polling Data

In our analysis, we are making several adjustments to the polling data.

• We are looking at the polling data mostly in six states.
• National polls are not the deciding factor even though they are giving a big edge to Biden.
• It appears that Trump rallies are attracting as much as 20% of the audience who previously voted for Clinton or did not vote.  This favors Trump. 
• There is more enthusiasm among Trump supporters than Biden supporters.  This favors Trump.
• The huge mail-in and early vote appear to be heavily from Democrats.  This favors Biden.
• On election day, turnout is likely to be heavier among Republicans than Democrats.  This favors Trump.

The Victor

After the foregoing adjustments are made, according to the data so far, Biden should win, but not so fast.

Fast-Changing Data

The data is changing fast.  For example, in the latest poll from the Des Moines Register, there is a shocker.  The Des Moines Register poll is a credible neutral poll.

This poll in September tied Biden and Trump at 47%.  The poll had a margin of error of plus or minus 3.4%. The latest poll shows Trump leading Biden by 48% to 41%.  This is a shocking swing in Trump’s favor.

If history is any guide, Trump surge in Iowa may spill into Michigan and Wisconsin, two of the important states noted above.

There appear to be two late-breaking trends.

• Republican turnout may be heading towards a larger turnout, compared to the adjustment already made to the data.
• The Black and Hispanic turnout appears to be heading towards lower numbers compared to what is in the polls.

Both of these trends favor Trump.  There simply is not enough data to quantify these trends and put them in a model.

Mail-in Votes

There are likely to be a lot of legal challenges from Republicans to the mail-in votes.

Investors need to understand that we do not have one election system in this country.  We have 50 election systems.  Of course here the concern is about only a handful of states.

Based on the information so far, how courts will rule on these challenges is not knowable at this time.

The Call

Opinions are a dime a dozen.

You already know that The Arora Report refrains from opinions unless backed by solid data and analysis. Based on the data so far, the best that can be said is that if the late-breaking trends stop in their tracks and the issue of court challenges is not a factor, Biden should win.  However, it is equally important to emphasize that the late-breaking trends are favoring Trump.  If these trends strengthen, Trump can easily win.

It is not the definitive call similar to the calls we have made in the past but this is the best that can be done at this time.

The Definite

From an investment perspective, here are some of the definites or near definites we can share.

Please click here for a chart of Dow Jones Industrial Average (DIA) which represents the popular stock market index (DJIA)

Note the following:

• This is a monthly chart giving investors a long term perspective.
• The market has retraced to the top of the support zone.
• If the election was not ahead, based on economic, technical and quantitative data, the call would have been that there was a high probability of the stock market breaking below the top support zone and going to the middle support zone.
• Investors should be very mindful that since the Arora buy signal in 2009 shown on the chart, the market has come up a long way and is overextended from a long term point of view.  In plain English, this means that there is more risk in this market than is generally believed.
• The Fed’s balance sheet has ballooned from $o.87 trillion in 2007 as shown on the chart to about $7 trillion. The balance sheet is simply a fancy way to describe money printing.  The Fed is likely to do everything it can to further inflate the stock market bubble irrespective of who is elected.
• Wall Street is positioned for a Biden victory.
• Wall Street is positioned for Republicans holding the Senate.
• The positioning for both of the above scenarios is small. Wall Street has learned its lesson from 2016 and is somewhat cautious.
• Wall Street is positioned for a stock market rally irrespective of who wins.
• Wall Street is not positioned for not knowing the results for a long time or a contested election.

Adjustments To The Portfolio And New Trades

There will be many new opportunities both long term and short term.  The impact of t his election will be felt worldwide.  The opportunities will extend beyond the United States to the rest of the world.

Protection bands, cash levels and hedges may also need to be adjusted.

There will be new posts as appropriate in the real-time feeds of all four services.

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 $1891, silver futures are at $24.13, and oil futures are $35.61.

S&P 500 futures resistance levels are 3320, 3390 and 3420: support levels are 3278, 3228 and 3182.

DJIA futures are up 334 points.