WEEKLY STOCK MARKET DIGEST: STOCK MARKET OBLIVIOUS – BIDEN PLANS A MAJOR MOVE AGAINST CHINA, CHINA DEVELOPS WEAPONS TO HIJACK SATELLITES

Twitter
LinkedIn
Facebook

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.’

 

STOCK MARKET OBLIVIOUS – BIDEN PLANS A MAJOR MOVE AGAINST CHINA, CHINA DEVELOPS WEAPONS TO HIJACK SATELLITES

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

Biden Plans To Escalate

Please click here for a chart of Nasdaq 100 ETF (QQQ).

Note the following:

  • The chart shows that QQQ has not been able to make much progress since it broke above the top band of the support/resistance zone.
  • The chart shows that QQQ is consolidating right above the upper band of the support/resistance zone.
  • The interpretation of the foregoing is that there is indecision on the part of the stock market.  
  • In the short term, it will come down to earnings of megacaps, such as Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG, GOOGL), and Meta (META).
  • The stock market is oblivious that Biden is planning a major move against China.  Biden is planning on issuing an executive order that will limit American corporations’ investments in China.
  • Biden plans to seek the support of G7 countries and request them to adopt similar measures.
  • Details of Biden’s order will matter.
    • Prudent investors understand that China would have never grown to become the world’s second largest economy with dreams to replace the U.S. as the superpower without American financing and technology as well as for years, free access to the U.S. market.
    • To understand the point, just take a look at Apple.  Apple is the most valuable American company.  Apple derives about 20% of its sales from China and until recently, almost all of its iPhones were manufactured in China.  Imagine if Apple could not invest to compete in China with Chinese companies for sales of mobile phones.  Imagine if Apple could not invest to improve its manufacturing in China.
  • China is not sitting still.  China is progressing to take on the U.S. A major concern stems from a new leak that China is developing weapons to hijack U.S. satellites.  The satellites are essential for the U.S. military to operate in any war.  
  • For the day, market mechanics will be the most important as options expire today.
  • As an actionable item, the protection band offers the proper balance between various crosscurrents.

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 🔒 in 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 oil in the early trade.  Smart money is 🔒 in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin is staying below $29,000.

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 $2001, silver futures are at $25.27, and oil futures are at $77.84.

S&P 500 futures are trading at 4153 as of this writing.  S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are up 42 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.

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 five 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.

 

RELENTLESS STOCK MARKET BUYING TAKES A PAUSE ON LOWER TESLA GROSS MARGINS

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

Relentless Buying Pauses

Please click here for a chart of Tesla stocks (TSLA).

Note the following:

  • The Morning Capsule is about the big picture.  The chart is of TSLA because TSLA earnings are moving the entire stock market.
  • The chart shows that TSLA stock has now fallen into the support zone.
  • The trendline on the chart shows that TSLA is now in a downtrend.
  • TSLA earnings were roughly in line, but gross margin came in about 2% lower than expected.  At a time when Tesla is aggressively cutting prices, gross margins become very important.
  • TSLA stock has fallen about 8% on earnings.
  • Putting further pressure on TSLA stock and the stock market is Musk’s comment that Tesla will continue to cut prices.
  • Most credible analysts are lowering their targets on TSLA.  The new targets have a wide dispersion ranging from $85 to $257.
  • TSLA bulls are aggressively buying the dip.  Here is the key question for prudent investors:
    • Will the Tesla support zone on the chart hold?
    • Will aggressive buying in TSLA stock on the dip cause the stock market to recover from early losses?  Nasdaq is down about 1% as of this writing in the premarket.
  • Not helping the stock market is that Apple’s (AAPL) key chip supplier Taiwan Semiconductor (TSM) is warning of slower chip sales.
  • On the positive side, in spite of rising mortgage rates, home builder D.R. Horton (DHI) is reporting blowout earnings.  DHI stock is jumping over 5% as of this writing in the premarket.
  • New York Fed President Williams is predicting that credit conditions will deteriorate.
  • Fed’s Waller is backing another interest rate hike in May.
  • In the Afternoon Capsule, we wrote:

Prudent investors should carefully watch to see if there is a delayed reaction to the Beige Book later today or tomorrow.

  • Yesterday, the stock market ignored the Beige Book, but this morning the stock market is listening as many analysts point to the Beige Book showing sharply lower loan demand.
  • Due to its importance, the following from the Afternoon Capsule is worthy of repeating:

Falling loan demand indicates slower future economic activity. Slower economic activity is negative for earnings and in turn negative for the stock market.

Jobless Claims

Initial jobless claims came at 245K vs. 242K consensus. This is a leading indicator and carries heavy weight in our adaptive ZYX global asset allocation model with inputs in ten categories.  Please click here to see the ten categories.

See also  SILVER, GOLD, AND COPPER BREAKOUT, WALL STREET’S LAST BEAR THROWS IN THE TOWEL

Continuing jobless claims increased by 61,000 to 1.865M.  This is the highest number since November 27, 2021.

In The Arora Report analysis, these numbers show that it is taking longer and is becoming more difficult to find a new job after a layoff.

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 is below $29,000.

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 $2010, silver futures are at $25.35, and oil futures are at $77.96.

S&P 500 futures are trading at 4147  as of this writing.  S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are down 153 points.

 

U.K. DATA WAKES BULLS UP TO THE POSSIBILITY THAT INFLATION MIGHT BE STICKY

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

U.K. Data

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 was not able to make much progress after breaking above the top band of the support/resistance zone.
  • The chart shows that the stock market is pulling back on U.K. data to the top band of the support/resistance zone.
  • CPI in the U.K. came at 10.1% year-over-year vs. 9.8% consensus. Month-over-month CPI was up 0.8% vs. 0.5% consensus.
  • The important point is that after a year of aggressive rate hikes, inflation in the U.K. is still very high.
  • On the U.K. data, stock market bulls are waking up to the possibility that inflation might be sticky and may not come down quickly to the Fed’s 2% target.  In this scenario, the Fed will keep interest rates higher for longer and may even be forced to raise interest rates beyond the 25 basis points that The Arora Report anticipates in the next meeting.
  • Investors should look at how the stock market is positioned.  The market is positioned for three to four rate cuts in 2023.  If the data starts showing that rate cuts are not coming, there may be selling.  Investors can gain an edge by understanding market positioning.  For those wanting in-depth information, listen to the podcast titled “Market Mechanics: Positioning.”
  • Here are the results of key earnings that investors have been watching:
    • Among regional banks, here are the earnings results:
      • WAL earnings were not that good, but the momo crowd is aggressively buying the stock.
      • US Bancorp (USB) earnings were better than expected.
      • Citizens Financial (CFG) earnings were not as good as expected.
    • Morgan Stanley (MS) earnings were worse than expected.
    • Netflix (NFLX) earnings were not good.  Initially, the stock fell 10%, but the momo crowd aggressively bought the dip, running it up into positive territory in the after market.  As the stock became stronger, it was met by sellers.  This morning, some degree of sanity is returning to the stock, and selling is coming in.
    • United Airlines (UAL) earnings were mixed.
    • Earnings of the big auto lender Ally Financial (ALLY) were worse than expected.
  • The Fed’s Beige Book will be released at 2pm.  It has the potential to move the markets.
  • As an actionable item, the protection band offers a good balance between various crosscurrents.
See also  META FALLS 15% ON GREAT EARNINGS, TESLA RISES 12% ON UGLY EARNINGS – HERE IS THE REAL REASON

Layoffs

META (META) and Disney (DIS) are set for more layoffs.

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

SEC is suing Bittrex for violation of securities regulations.  Bittrex was once the largest U.S. based exchange for trading crypto.  Bittrex is planning to wind down its U.S. operations.

Coinbase (COIN) is currently the largest U.S. crypto exchange.  There are reports that COIN is contemplating moving its headquarters outside of the U.S. due to the pressure from SEC to meet regulations.

Bitcoin has fallen below $30,000 as investors contemplate the fact that U.S. regulators seem determined to weed out bad behavior in crypto. 

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 $1992, silver futures are at $25.16, and oil futures are at $79.67.

S&P 500 futures are trading at 4153  as of this writing.  S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are down 88 points.

 

CHEAP DEPOSITS FUEL BIG BANKS, TRILLION-DOLLAR TROUBLES IN COMMERCIAL REAL ESTATE, CHINA GDP

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

Cheap Deposits

Please click here for a chart of Bank of America stock (BAC).

Note the following:

  • The Morning Capsule is not about a single stock.  It is about the big picture.  The chart of BAC is being used to illustrate the point.
  • The chart shows when the banking crisis started.
  • The chart shows a positive reaction to earnings even though the stock had moved up going into earnings.
  • Earnings from BAC are instructive.
    • Earnings came at $0.94 vs. $0.81.
    • Revenues came at $26.3B vs. $25.2B consensus.
    • Net interest income jumped 25% to $14.4B.
    • Deposits are 34% higher compared to pre-pandemic Q4 2019.  This computes to $400B of excess deposits.  The blended yield on these excess deposits is 2.9%.
    • Customers continue to maintain large deposits in accounts yielding 0.1%.
  • Last week other large banks JPM, C, and WFC also reported good earnings.
  • Banks are enjoying paying 0.1% on deposits and charging 10 – 12% on many loans.  
  • Big bank earnings show that big banks have not been impacted by the banking crisis.  This is encouraging buying in the stock market. Goldman Sachs (GS) stock is being hit on earnings, but that is a special case being limited to Goldman Sachs.
  • Regional bank earnings are about to pour in.  Prudent investors will be carefully watching these earnings.

Commercial Real Estate

As we previously shared with you, there have been a handful of cases of property owners walking away from trophy properties on the west coast.  Now it is spreading to the east coast.  Brookfield funds have stopped paying on a mortgage for a dozen buildings around Washington DC.

More trouble is ahead for commercial properties.  About $1.5T worth of loans are coming due between now and 2025.  These loans will have to be priced at much higher interest rates, but the cash flows of these buildings do not support much higher mortgage payments.

As full disclosure, ZYX Short has very profitable positions in ESRT, the owner of the Empire State Building, and in SLG, a big landlord in Manhattan.

In spite of a big drop in commercial real estate values, such as 68% in the case of ESRT, it would not be a surprise to see additional 25% – 40% drops.  An opportunity is potentially developing for long term investors to build a position in REITs.  Buying REITs is just like buying stocks.  It goes without saying that buying REITs is a lot easier than buying real estate directly.  If this potential opportunity is of interest to you, please write to subscription@thearorareport.com. Please indicate your level of interest and any past experience with real estate.

China

China GDP came at 4.5% year-over-year vs. 4.0% consensus.  This data shows that China is growing faster than expected coming out of the pandemic.  This is a positive for the stock market.

Housing Starts

New housing is slowing but investors continue to aggressively buy stocks of home builders. The reason is that the weakness is in multi-family starts.   Here is the data just released:

  • Housing starts came at 1.42M vs. 1.458M consensus.
  • Building permits came at 1.413M vs. 1.407M consensus.

Layoffs

Accounting giant Ernst & Young is terminating 3,000 employees in the U.S.  This shows that layoffs are spreading beyond tech.

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 has moved above $30,000.

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 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.

See also  A GAME CHANGER FOR TESLA IN CHINA ALSO HELPING APPLE, JAPAN INTERVENES, TREASURY REFUNDING

Gold futures are at $2012, silver futures are at $25.19, and oil futures are at $80.70.

S&P 500 futures are trading at 4195  as of this writing.  S&P 500 futures resistance levels are 4318, 4400, and 4460: support levels are 4000, 3950, and 3860.

DJIA futures are up 32 points.

 

86% PROBABILITY OF A RATE HIKE, BUYING ON HOPE STRATEGY AHEAD OF 59 S&P 500 COMPANY EARNINGS THIS WEEK

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

86% Probability Of A Rate Hike

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 probability of a 25 basis point rate hike in the FOMC meeting has risen to 86%.
  • Momo gurus were previously predicting that the Fed would not raise interest rates in the upcoming meeting and that was the reason to buy stocks.  Momo gurus are now accepting that the Fed is likely to raise rates. However, momo gurus still maintain that the reason to buy stocks is that the Fed will cut rates 3 – 4 times this year.
  • In The Arora Report analysis, the probability of the Fed cutting interest rates this year is very low.  The chart shows that the stock market is consolidating right above the top band of the support/resistance zone.
  • The chart shows that RSI is no longer overbought.  The interpretation of RSI is that the stock market can go either way.
  • 59 S&P 500 companies are reporting earnings this week.
  • As is their pattern, the momo crowd is buying stocks ahead of these earnings on hope strategy.
  • A noteworthy earnings report this morning is from Charles Schwab (SCHW).  Normally, Schwab earnings are a non-event.  However, this time Schwab earnings are very important as the stock has taken a major hit due to unrealized losses on its balance sheet.  The momo crowd initially bought SCHW on earnings, ignoring the unrealized losses.  As of this writing, selling is coming in.  Prudent investors should carefully watch Schwab’s stock.
  • A part of the rise in the stock market has been due to excitement over artificial intelligence.  Investors should carefully watch GOOG.  There are three pieces of important news:
    • Bulls are excited that Sundar Pichai, CEO of Alphabet, did well in his 60 Minutes interview.
    • Google has an urgent project named Magi underway to incorporate artificial intelligence in its offerings similar to what Microsoft (MSFT) has already accomplished.  There are reports that more than 160 people are working on Magi.
    • There is speculation that Samsung (SSNLF) is looking at switching from Google to Bing as the default on its phones.  In The Arora Report analysis, this is the most important piece of information.  
    • Prudent investors should ask the question, “Could Apple (AAPL) be the next to consider switching away from Google?”  Google pays billions of dollars to Apple for the privilege of keeping Google as the default search engine on iPhones.
    • There is a fortune to be made in artificial intelligence.  Investors should consider building their knowledge.  Listen to the in-depth podcasts titled “Full Frontal Assault: ChatGPT Vs. Bard” and “ChatGPT: Potentially The Most Important Breakthrough Since The iPhone.”

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 has fallen below $30,000 as of this writing. There is disappointment among bitcoin bulls that whales did not take advantage of low liquidity over the weekend to run bitcoin up further.

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 $2013, silver futures are at $25.47, and oil futures are at $81.91.

S&P 500 futures are trading at 4163  as of this writing.  S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are up 22 points.

To take a free 30-day trial to paid services to gain access to more opportunities, please click here.

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.

Please click here to take advantage of a FREE 30 day trial.

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.

Subscribe to 'Generate Wealth'

Free Forever

More To Explore

30 Day Free Trial

Cancel within 30 days and you owe nothing

When you take a FREE 30 day trial, you get access to powerful techniques used by billionaires and hedge funds to grow richer. You can continue to use these powerful techniques to grow richer even if you cancel your subscription. You come out ahead by subscribing no matter how you look at it.

A fortune is to be made from AI stocks.
Get the list of 18 AI stocks to grab your share of the profits — no cost to you.

A fortune is to be made from AI stocks.

Get the list of 18 AI stocks to grab your share of the profits.

AI is a $1 Trillion Market

Making A Fortune
In Artificial Intelligence

Golden Age of Artificial Intelligence

Skip to content