FED IS CONCERNED ABOUT PREVAILING WISDOM IN THE MARKETS

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By Nigam Arora & Dr. Natasha Arora

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

Fed Concern

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:

  • In the Morning Capsule, we wrote that the momo crowd was buying stocks ahead of JOLTS, ISM, and FOMC minutes.
  • The chart shows when JOLTS and ISM data were released
  • JOLTS job openings came at 10.458M.
    • In The Arora Report analysis, the Fed would like to see a number below 9M.  
  • Here are the details of the ISM data:
    • ISM Manufacturing Index came at 48.4% vs. 48.5% consensus.
    • New Orders Index came at 45.2% vs. 47.2% consensus.
    • Prices Index came at 39.4% vs. 43.0% consensus.
    • Backlog of Orders Index came at 41.4% vs. 40.0% consensus.
    • Supplier Deliveries Index came at 45.1% vs. 47.2% consensus.
    • Production Index came at 48.5% vs. 51.5% consensus.
    • New Export Orders Index came at 46.2% vs. 48.4% consensus.
    • Employment Index came at 51.4% vs. 48.4% consensus.
  • There are two important points in the ISM data.
    • Prices Index fell to the lowest level since April 2020.  This should be comforting to the Fed.
    • The Employment Index went up.  This should be worrisome to the Fed.
  • The most important information from the FOMC minutes is that the Fed is concerned about misperception in the markets that the Fed is about to stop raising rates, stop fighting inflation, and start cutting rates.  We typically do not see the Fed being so explicit about the prevailing wisdom in the markets.
  • The Fed’s concern is similar to the concern that The Arora Report has expressed several times.  In our analysis, there is a high probability that the prevailing wisdom in the markets is wrong.
  • Keep in mind that the stock market these days is controlled by the momo crowd in the short term.  The momo crowd follows momo gurus.  Right or wrong, the reality is that momo gurus’ job is to twist the Fed’s words to run up the stock market.
  • The Fed’s concern is very valid because to date, momo gurus have succeeded.  
  • Here are additional key details from FOMC minutes:
    • None of the members anticipate cutting interest rates in 2023.
    • The Fed is still cautious about prematurely loosening monetary policy.
    • The pace of future rate increases will continue to be data dependent.
  • It is clear from the FOMC minutes that the Fed is sharply focused on wage inflation in services, and the Fed does not want to repeat Burns’s blunder. Please see prior capsules about Burns’s blunder.
  • 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 was mixed but has turned orange as of this writing.  This indicates that there are sellers taking advantage of the strength after the Fed minutes.
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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 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

🔒

Nibbling

🔒

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

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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