WEEKLY STOCK MARKET DIGEST: INVESTORS BEGINNING TO REMEMBER RISKS IN STOCK MARKET

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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.’

 

JOBS ROCKET PAST ESTIMATES, BE CAREFUL LISTENING TO STOCK MARKET PERMABULLS

April 05, 2024

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

Hot Jobs Report

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 that the stock market has broken below the upward sloping trendline.
  • The chart shows that was a perfect setup for the stock market to drop yesterday when Israel went on high alert due to the prospect of Iranian retaliation.  As a member of The Arora Report you already knew in advance that retaliation was coming.
  • As is their pattern, the momo crowd was buying stocks this morning ahead of the mother of all numbers, the jobs report, on hope strategy.
  • Jobs report came much hotter than expected. Here are the details:
    • Non-farm payrolls came at 303K vs 200K consensus.  This indicates that the economy is strong and a large number of new jobs are being created.  The vast majority of these jobs are at the low end such as in hospitality. Jobs remain weak in information technology as more workers are replaced by AI.
    • Nonfarm private payrolls came at 232K vs 160K consensus.  This indicates that there is no need to cut interest rates at this time.
    • Unemployment rate came at 3.8% vs 3.8% consensus.  The unemployment rate remains low.
    • Average hourly earnings came at 0.3% vs 0.3% consensus.  This indicates that reducing inflation from here will be difficult.
    • Average work week came at 34.4 vs 34.3 consensus.
  • The stock market briefly lost the gains but the momo crowd aggressively bought the dip.
  • In The Arora Report analysis, the hot jobs report is reducing the probability of rate cuts starting in June.  Keep in mind that momo gurus claim to know for sure that rate cuts will start in June.  You may remember that the same momo gurus knew for sure that there would be six rate cuts this year starting in March.  Clearly, momo gurus have been wrong.  However, prudent investors need to understand that momo gurus are often wrong because they are not driven by objective analysis.  Their job is to persuade investors to buy stocks in the disguise of analysis.  To fulfill their job, they must be permabulls.  Consider not listening to permabulls or permabears.
    • Prudent investors should start with Arora’s Second Law of Investing and Trading: “Nobody knows with certainty what is going to happen next in the markets.”  Follow with Arora’s Third Law, which states, “Making investing and trading decisions based on probabilities is the only realistic and profitable approach.”
  • In The Arora Report analysis, the probability of a rate cut in June is now down to about 50% based on the data so far.  However, investors need to keep two facts in mind:
    • There is plenty of data between now and June that can change the course.
    • Powell is clearly itching to cut rates.  It is not clear what Powell’s motivation is.  Some conservative analysts believe that Powell wants to cut rates to help Biden get reelected.  Trump has stated that he will not reappoint Powell.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Apple (AAPL), Amazon (AMZN), Meta (META), Nvidia (NVDA), and Microsoft (MSFT).

In the early trade, money flows are negative in Alphabet (GOOG) and Tesla (TSLA).

In the early trade, money flows are positive in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).

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 *** in the early trade.

Gold

The momo crowd is *** gold in the early trade.  Smart money is *** in the early trade.

For longer-term, please see gold and silver ratings.

Oil

The momo crowd is *** in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) is range bound.

Markets

Our very, very short-term early stock market indicator is ***.  Keep in mind two opposing crosscurrents today.  Many investors will be selling to reduce risk ahead of potential escalation in the Middle East over the weekend.  On the flip side, today is Friday and short squeezes tend to take place on Fridays.  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 $2308, silver futures are at $26.77, and oil futures are at $86.61.

S&P 500 futures are trading at 5221 as of this writing.  S&P 500 futures resistance levels are 5256, 5400, and 5500 : support levels are 5210, 5020, and 4918.

DJIA futures are up 44 points.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding *** in cash or Treasury bills 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.

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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.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of seven year duration or less.  Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

 

AGGRESSIVE BUYING IN SILVER AS POWELL ITCHING TO CUT RATES

April 04, 2024

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

Fueling Positive Sentiment

Please click here for a chart of silver ETF (SLV).

Note the following:

  • The chart shows aggressive buying in silver.
  • Silver ETF SLV is in the ZYX Buy Model Portfolio.  The position is nicely profitable.
  • The chart shows silver is breaking out of short term resistance.
  • Significant overhead resistance is ahead that was created when the meme crowd went crazy in 2020 and 2021 and bought all the physical silver they could.
  • In part, what happens to silver will depend on if the meme crowd goes crazy again.
  • For the last few years, the traditional relationship between how silver moves relative to gold has been broken.
  • The move on the chart shows that the traditional relationship between silver and gold moves is returning.
  • The big move in silver is being triggered by Powell itching to cut rates.
  • Powell has become ultra dovish.  Fed Chair Powell is itching to cut interest rates.  Powell said that the recent hotter inflation data does not “materially change” the outlook and he anticipates cutting interest rates later in the year.
  • ISM Non-Manufacturing PMI came at 51.4% vs. 52.6% consensus.  The weaker than expected services data caused the stock market to go up on its release.
  • Sentiment was already extremely positive.  Powell itching to cut rates and weaker ISM Services data is adding to the extremely positive sentiment.
  • Also adding to the extremely  positive sentiment are two pieces of news:
    • Apple (AAPL) is working on a home robot as the next big thing.
    • Google (GOOG, GOOGL) may charge for search based on AI.
  • Jobless claims came at 221K vs. 214K consensus.  This indicates that the jobs picture is still very strong, but not as strong as seen over the prior few weeks.
  • The jobs report, the mother of all numbers, will be released tomorrow at 8:30am ET.  The jobs report will likely be market moving.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.

Magnificent Seven Money Flows

In the early trade, money flows are positive in AAPL, Amazon (AMZN), Meta (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA).

In the early trade, money flows are negative in GOOG.

In the early trade, money flows are positive in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

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

Gold

The momo crowd is *** gold in the early trade.  Smart money is *** in the early trade.

For longer-term, please see gold and silver ratings.

Oil

The momo crowd is *** oil in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) is range bound.

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 $2304, silver futures are at $27.05, and oil futures are at $85.08.

S&P 500 futures are trading at 5291 as of this writing.  S&P 500 futures resistance levels are 5400, and 5500: support levels are 5256, 5210, and 5020.

DJIA futures are up 203 points.

 

WALL STREET WAKES UP TO THE RISK IN THE STOCK MARKET – HOPING FOR A DOVISH POWELL TO RUN UP STOCKS

April 03, 2024

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

Waking Up To Risk

Please click here for a chart of 20+ Year Treasury Bond ETF (TLT).

Note the following:

  • Focus on the downward sloping trendline on the chart.
  • According to momo gurus, the reverse was supposed to happen.  In plain English, this means if the predictions of momo gurus were correct, there would have been an upward sloping trendline.
  • The downward trendline on the chart shows that the risk to the stock market has been progressively increasing.  However, investors have been asleep.  As the quarter turned, all of a sudden some investors have woken up to the risk.  The trigger for investors waking up was smart money selling on the first day of a new quarter.  As usual, The Arora Report members were ahead of the curve from the Morning Capsule that was published prior to the market open on April 1.  We wrote:

Prudent investors should note that today, at least temporarily as of this writing, is a departure from the traditional pattern.  As of this writing, the rally in stock futures is fizzling.  The reason is that smart money is selling into the strength.

  • The chart shows that TLT has fallen into the support zone.
  • It is extremely critical for the support zone to hold for the stock market to hold up.  Stay tuned to The Arora Report for updates. 
  • ADP is the largest payroll processor in the country and uses its data to give an advanced glimpse of the jobs picture ahead of the official jobs report that will be released on Friday at 8:30am ET.  ADP employment data came stronger than expected.  ADP employment change came at 184K vs. 150K consensus.
  • ISM Non-Manufacturing PMI will be released at 10am ET.  The consensus is 52.6%.  If the data is stronger and inflationary, it will be a headwind for the stock market.  On the other hand, if the data is weaker, expect a rip roaring rally.
  • Powell will be speaking at 12:10pm ET today.  Powell’s speech may be market moving.  Powell has become the most dovish Fed member.  Investors are hoping that Powell will be extra dovish and calm their nerves.
  • The Fed’s Bostic maintains that he sees only one rate cut in the fourth quarter.
  • Several other Fed officials are speaking today but Powell is likely to overshadow them.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.
See also  SILVER, GOLD, AND COPPER BREAKOUT, WALL STREET’S LAST BEAR THROWS IN THE TOWEL

Magnificent Seven Money Flows

In the early trade, money flows are positive in Meta (META).

In the early trade, money flows are neutral in Apple (AAPL) and Microsoft (MSFT).

In the early trade, money flows are negative in Amazon (AMZN), Alphabet (GOOG), Nvidia (NVDA), and Tesla (TSLA).

In the early trade, money flows are negative in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

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

Gold

There is aggressive buying in silver.  Silver ETF SLV is in the ZYX Buy Model Portfolio.  The position has nice profits. 

The momo crowd is *** gold in the early trade.  Smart money is *** in the early trade.

For longer-term, please see gold and silver ratings.

Oil

API crude oil inventories came at a draw of 2.286M barrels vs. consensus of a draw of 2M barrels.

The momo crowd is *** oil in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) is range bound.  Bitcoin whales have been taking profits by selling bitcoin to retail investors.  Retail investors are buying because they do not understand that whales control bitcoin.

Money is to be made in bitcoin. However, to make the money, you need to understand bitcoin whales’ secrets.  These secrets are not publicly available.  To access the secrets, please click here to fill out the form.

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 range bound.

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 $2298, silver futures are at $26.71, and oil futures are at $85.83.

S&P 500 futures are trading at 5249 as of this writing.  S&P 500 futures resistance levels are 5256, 5400, and 5500: support levels are  5210, 5020, and 4918.

DJIA futures are down 47 points.

 

ISRAEL KILLS TOP IRANIAN GENERAL – OIL RISES – NOT GREAT FOR STOCK MARKET’S NO INFLATION STORY

April 02, 2024

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

Raise Hedges

It is time to raise hedges. There will be a separate post.  Also, see the Protection Band section below.

Middle East Tensions

Please click here for a chart of crude oil futures (CL_F).

Note the following:

  • An Israeli air strike on the Iranian consulate in Damascus, Syria killed a top Iranian general.  Iran is vowing revenge.
  • The chart shows oil is rising.
  • Both trendlines on the chart show a bottoming pattern in oil.
  • The upper trendline on the chart shows that oil is threatening to break out.
  • Rising oil means higher gasoline prices.
  • The general American public tends to measure inflation by gas prices.  Higher gas prices means higher inflation expectations.
  • The Fed does not want inflation expectations to rise.  The reason is that as inflation expectations rise, it becomes a self-fulfilling spiral.
  • Rising oil works against momo gurus’ narrative that investors should buy stocks as there is nothing to worry about in regards to inflation.  Keep in mind that momo gurus’ real job is to persuade investors to buy stocks under the disguise of analysis.  This is the reason investors should be very careful about what they hear from momo gurus.  Investors should rely on an independent source of analysis where the sole agenda is the wellbeing of investors.
  • ISM Manufacturing Index came at 50.3% vs. 48.5% consensus.  This indicates manufacturing is strengthening.  This strong data reduces the probability of a rate cut in June.
  • Yields are rising.  10-year Treasuries are hitting 4.393%.  This is the highest level since November.
  • Of special note for prudent investors is that in spite of blind money flooding Wall Street, the stock market is not able to rise.  
  • Two pieces of news are impacting the extremely bullish sentiment in a negative way this morning.
    • Tesla (TSLA) deliveries came at 387K  vs. 457K consensus.
    • The rate increase for Medicare Advantage is less than anticipated.  This is causing selling in CVS, ELV, UNH, and HUM.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.

Magnificent Seven Money Flows

In the early trade, money flows are negative in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Apple (AAPL), and TSLA.

In the early trade, money flows are negative in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

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

Gold

The momo crowd is *** gold in the early trade.  Smart money is *** in the early trade.

For longer-term, please see gold and silver ratings.

Oil

The momo crowd is *** oil in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Whales are taking profits on bitcoin (BTC.USD).

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 range bound.

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.

See also  SUPER MICRO FOLLY, STOCK MARKET DIRECTION DEPENDS ON WHICH POWELL SHOWS UP – OBJECTIVE OR POLITICAL

Gold futures are at $2276, silver futures are at $25.74, and oil futures are at $84.83.

S&P 500 futures are trading at 5261 as of this writing.  S&P 500 futures resistance levels are 5400, and 5500: support levels are 5256, 5210, and 5020.

DJIA futures are down 319 points.

 

BETTER PERFORMER THAN NVIDIA – COPPER STOCK FREEPORT (FCX) ON CHINA OPTIMISM, FRONT RUNNING BLIND MONEY FIZZLES

April 01, 2024

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

Portfolio Construction

Please click here for a chart of Freeport-McMoRan (FCX) compared to Nvidia (NVDA).

Note the following:

  • The Morning Capsule is about the big picture, not individual stocks.  The charts of Freeport-McMoRan (FCX) stock and Nvidia (NVDA) stock are being used to illustrate the point.
  • FCX is a major copper producer. FCX is in the ZYX Buy Model Portfolio.
  • The chart shows FCX price action in the top pane and NVDA price action in the bottom pane.
  • The chart shows that FCX has performed almost 100% better than NVDA for the period shown.  This comes as a surprise to most investors.  This illustrates the need to properly construct a model portfolio diversified by strategies.  The Arora Report uses over 50 different strategies.  Constructing a great portfolio is highly complex.  The easiest way for most investors and investment advisors is to follow the Model Portfolios in The Arora Report.
  • The reason FCX, along with other copper stocks, has done so well is optimism about China’s economy.  China is a major copper user.
  • Purchasing Managers’ Index is a leading indicator.  The official data just released from China is positive. A PMI over 50 is considered economic expansion.  China’s Manufacturing PMI moved to expansion for the first time since September of last year.
    • Manufacturing PMI in China came at 50.8 vs. 50.1 consensus.
    • Non-Manufacturing PMI came at 53.0 vs. 51.3 consensus.
  • On Friday when the U.S. market was closed, core PCE came at 0.3% vs. 0.3% consensus.  PCE is the Fed’s favorite inflation gauge.
  • Fed Chair Powell said that the PCE data was inline with his expectations.  Powell said that lower interest rates would not be right until the Fed is sure about inflation.
  • When futures opened on Sunday evening, the momo crowd aggressively bought stock futures and continued to buy them until earlier this morning.  The reason is that Wall Street often front runs the blind money.
  • The blind money is the money that pours into the stock market on the first two days of a new month without any analysis and irrespective of market conditions.  Blind money is not price sensitive, i.e. blind money does not care the price it is paying for the stocks. Most of the blind money is invested in the afternoon.  Traders know this and they buy stocks to sell to blind money at a higher price.
  • Prudent investors should note that today, at least temporarily as of this writing, is a departure from the traditional pattern.  As of this writing, the rally in stock futures is fizzling.  The reason is that smart money is selling into the strength.  
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.

Turkey

There is a surprise in the Turkey elections.  Opposition won the municipal elections.  This may create opportunities in Turkey.  Such opportunities will be in ZYX Emerging.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), Microsoft (MSFT), and Tesla (TSLA).

In the early trade, money flows are neutral in Nvidia (NVDA), Meta (META), and Alphabet (GOOG).

In the early trade, money flows are negative in Apple (AAPL).

In the early trade, money flows are mixed in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

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

Gold

Gold is seeing aggressive buying and hitting a new high. 

The momo crowd is *** gold in the early trade.  Smart money is *** in the early trade.

For longer-term, please see gold and silver ratings.

Oil

The momo crowd is *** oil in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin (BTC.USD) is range bound.

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 range bound.

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 $2277, silver futures are at $25.35, and oil futures are at $83.28.

S&P 500 futures are trading at 5312 as of this writing.  S&P 500 futures resistance levels are 5400, and 5500: support levels are 5256, 5210, and 5020.

DJIA futures are down 53 points.

 

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Picture of 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.

Picture of 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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