WEEKLY STOCK MARKET DIGEST: MARKET BREAKS ABOVE RESISTANCE ON ARTIFICIAL INTELLIGENCE EXCITEMENT, EUROPEAN STOCKS RALLY

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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.’

MARKET BREAKS ABOVE RESISTANCE ON ARTIFICIAL INTELLIGENCE EXCITEMENT, EUROPEAN STOCKS RALLY

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

Artificial Intelligence Excitement

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 pushed above the resistance line on artificial intelligence excitement.  In the Afternoon Capsule, we wrote,

At least for today, the stock market is totally ignoring these negative developments as the artificial intelligence frenzy has taken over.  There have been three developments to add to the artificial intelligence frenzy.

  • The ChatGPT app is now available on iPhones and will soon be available on Android.

  • Even after the big run, two analysts upgraded Nvidia (NVDA).

  • Japan is giving a large subsidy to Micron (MU) to set up a new plant in Japan.  Micron will use extreme ultraviolet (EUV) technology in Japan to manufacture  next generation DRAM.  Artificial intelligence will cause demand for DRAM to go up significantly.

  • The upper resistance zone shown on the chart is the next target.
  • Hunt and destroy algorithms are active.
  • Technically oriented investors are jumping all in.
  • The momo crowd is becoming even more aggressive.
  • Only seven stocks are driving most of the gain.  Those stocks are Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Nvidia (NVDA), Alphabet (GOOG, GOOGL), Meta (META), and AMD (AMD).  Six of these seven stocks are in the ZYX Buy Model Portfolio.
  • Those who sold stocks in anticipation of a national debt crisis are buying back stocks, adding to the upward pressure.
  • Today is Friday.  Short squeezes occur on Fridays.  Let us see if a short squeeze starts today.
  • Monthly options are expiring today.  A part of yesterday’s rally was due to option expiration.
  • Call option volume yesterday was the highest in two months.  This indicates that investors are becoming very optimistic.
  • On the cautionary side, yesterday was only the second day this quarter when new highs exceeded new lows.
  • This quarter’s strength is driven by only seven stocks accompanied by broad market weakness, making it unlike any other quarter in recent history.

Europe

Stocks in Germany are approaching a new high.  Stocks across Europe are staging a broad rally.

Japan

Foreign money is flowing into Japan as Japanese stocks are cheap.  Japanese stocks are hitting a 33-year high.

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

For longer-term, please see oil ratings.

Bitcoin

Bitcoin is range bound.

Markets

Our very, very short-term early stock market indicator is 🔒 but expect the market to open 🔒.  If a short squeeze does not start, the market may pull back.  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 $1963, silver futures are at $23.77, and oil futures are at $73.31.

S&P 500 futures are trading at 4225  as of this writing.  S&P 500 futures resistance levels are 4318, 4400, and 4460: support levels are 4200, 4000, and 3950.

DJIA futures are up 87 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.

See also  AAPL: THE GOOD, BAD, AND UGLY OF THE POTENTIAL TRUMP PRESIDENCY — RAISING THE TARGET

 

$1 TRILLION SHOCK AHEAD – STOCK MARKET COILED SPRING BREAKS TO THE UPSIDE – NEXT TRIGGER AT THE RESISTANCE LINE

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

$1 Trillion Shock Ahead

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 market mechanics took over and the stock market broke out from the tight coiled spring formation.  See the Afternoon Capsule for details on market mechanics.
  • The chart shows that the breakout was on higher volume.
  • A large number of less informed investors are waiting for a break above the red resistance line shown on the chart to aggressively buy stocks.
  • The stops of less informed short sellers are right above the red resistance line shown on the chart. This creates an opportunity for hunt and destroy algorithms to potentially take out the stops of the shorts and suck a large number of investors into a bull trap.  Those interested in next-level information should consider listening to the podcast titled “Wall Street Secret: Hunt And Destroy Algorithms.”
  • Please read yesterday’s Morning Capsule for the six dimensions of the stock market.  One of the dimensions is liquidity.
  • In The Arora Report analysis, right now, liquidity in the system is high because the U.S. Treasury is not borrowing at its normal rate due to the debt ceiling.  This high liquidity is partly responsible for the levitation of the stock market and money going to mega caps along with the excitement over artificial intelligence (AI). 
  • In The Arora Report analysis, a potential $1T shock is ahead for the stock market.  When the debt ceiling deal is reached, the U.S. Treasury is likely to become aggressive in selling bonds.  This will drain liquidity out of the stock market.  Some of the money that has flown into Apple (AAPL) and Microsoft (MSFT) will likely come out and go into bonds.  
  • Walmart (WMT) earnings are better than expected.  Walmart stock is rising as of this writing.

Jobless Claims

Initial claims came at 242K vs. 259K consensus.  This is causing yields to rise.

Earlier in the morning, stock futures were higher.  The futures are slipping after release of the jobless claims number.  The momo crowd does not like the stronger jobs picture that is painted by the jobless claims number.

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

For longer-term, please see oil ratings.

Bitcoin

Bitcoin 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 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 $1971, silver futures are at $23.66, and oil futures are at $72.38.

S&P 500 futures are trading at 4165  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 114 points.

 

STOCK MARKET TRACING THE PATTERN OF COILED SPRING THAT IS BEING WOUND TIGHTER

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

Coiled Spring

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 is tracing a pattern of a coiled spring that is being wound tighter.
  • The chart shows that as the spring is wound tighter, the volume is low.
  • The reason behind the coiled spring being wound tighter is that in the battle, bulls and bears are equally matched.
  • Low volume shows that neither bulls nor bears are expending their firepower.  This happens when neither side has conviction.
  • Historically, the coiled spring pattern results in a major break.  The break can occur either to the upside or to the downside.
  • Investors should look at the stock market in six dimensions.  Here are the six dimensions:
    • Macro
    • Fundamental
    • Technical
    • Quantitative
    • Liquidity
    • Sentiment
  • The six dimensions provide a simple way for investors to make good judgements about the stock market.  For those who want to build next-level knowledge, there is a podcast available titled “Never Be Confused Again: Six Dimensions Of The Stock Market.”
  • Right now, macro, fundamental, and quantitative are bearish; technical, liquidity, and sentiment are bullish.
  • There is a high likelihood that market mechanics will take over at some point and trump all of the six dimensions.
  • When taken in totality, earnings from Target (TGT) and TJX Companies (TJX) are slightly worse than expected.  However, the momo crowd aggressively bought the early dip on earnings.  Both stocks are up as of this writing as a result of momo crowd buying.
  • There is optimism this morning on the progress towards debt ceiling resolution.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.
See also  DON’T IGNORE CHINA RISK IF YOU ARE CAUGHT UP IN AI FRENZY, EUPHORIA BUILDS ON COOLER CPI, $2400 GOLD

Momo Crowd And Smart Money In Stocks

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

Gold

Gold has fallen under $2,000 due to stronger dollar and progress on the debt ceiling.

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 build of 3.69M barrels vs. a consensus of a draw of 1.3M 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 has fallen below $27,000.  It appears that whales have taken the opportunity to sell into the strength generated by mom and pop buying.

Markets

Our very, very short-term early stock market indicator is 🔒 but expect the market to open 🔒.  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 $1989, silver futures are at $23.90, and oil futures are at $71.14.

S&P 500 futures are trading at 4141  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 178 points.

 

HOME DEPOT CUTS REVENUE FORECAST – MOMO CROWD BUYS THE DIP

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

Biggest Miss In 20 Years

Please click here for a chart of Home Depot stock (HD).

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of Home Depot stock is being used to illustrate the point.
  • The chart shows a gap down in Home Depot stock after the earnings release.
  • The chart shows that initially the stock fell about 5%.
  • The chart shows that the initial drop was below the support line.
  • As is their pattern, the momo crowd aggressively bought the dip.  As a result, Home Depot stock has recovered over one of half of its initial loss as of this writing.
  • Home Depot is the largest retailer of home improvement goods in the country.  Here are the key points from the earnings:
    • Revenues came at $37.26B vs. $38.2B consensus.  This is the biggest miss in 20 years.
    • Home Depot cuts FY23 revenue projections to a drop of 2% – 5% vs. a consensus of flat.
    • Home Depot cuts FY23 earnings projections down to 7% – 13% vs. consensus of down 5%.
    • Home Depot expects operating margins to be 14% – 14.3% vs. 14.5% consensus.
  • As the day progresses, prudent investors should watch to see if HD stock falls below the support line shown on the chart or if it recovers to fill the gap.  This will be a good indication of how non-momo crowd investors react to the news.
  • The stock market always has cross currents.  Today, the negative news from Home Depot is being counteracted by retail sales data.  Here are the details:
    • April retail sales ex-auto came at 0.4% vs. 0.3% consensus.
    • Headline retail sales came at 0.4% vs. 0.7% consensus.

China

Excluding Japan, there was negative sentiment in Asia on economic data from China.  Here are the key points:

  • Retail sales came at 18.4% year-over-year vs. 21% consensus.
  • Industrial production came at 5.6% year-over-year vs. 10.9% consensus.

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

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

Oil

The Biden administration is deciding to purchase 3M barrels to begin refilling the Strategic Petroleum Reserve (SPR).

IEA is forecasting the world oil demand will increase by 2.2M bpd this year to a record 102M bpd.  This is primarily due to record oil demand from China.  

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

For longer-term, please see oil ratings.

Bitcoin

Bitcoin bulls are disappointed that the rally is not continuing.  However, bitcoin is still holding above $27,000.

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 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 $2016, silver futures are at $24.16, and oil futures are at $71.15.

S&P 500 futures are trading at 4139  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 108 points.

 

POSITIONING AND RETAIL EARNINGS GENERATING OPTIMISM; OPPORTUNITIES AHEAD IN THAILAND, TURKEY, AND INDIA

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

Retail Earnings And Positioning

Please click here for a chart of Walmart stock (WMT).

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of Walmart stock is being used to illustrate the point.
  • The chart shows that Walmart stock is in the resistance zone.
  • The pattern shown on the chart often leads to a breakout.
  • Earnings from important retailers are ahead this week:
    • Home Depot (HD) earnings are on Tuesday.
    • Target (TGT) and The TJX Companies (TJX) earnings are on Wednesday.
    • Walmart (WMT) and Ross Stores (ROST) earnings are on Thursday.
    • Lowe’s (LOW) earnings are on Tuesday next week.
  • Positioning outside the momo crowd is for a pullback in the stock market.  Paradoxically, if retail earnings are good and the stock market starts moving higher, negative positioning will provide fuel to power the stock market to break above 4200 in S&P 500.  This is the bull case.
  • The bearish case is that the stock market is overvalued and there is no valuation support for the stock market to go higher.
  • Further, the bears point out that without the artificial intelligence (AI) frenzy, S&P 500 year to date would have been down 2% instead of up 8%.  Investors should develop a deeper understanding of the AI frenzy.  We are working on a podcast on the subject for those who want next-level information on AI.  The podcast will be available in Arora Ambassador Club.
  • An actionable item from the foregoing is the protection band, which strikes the proper balance between various crosscurrents.
See also  HERE IS HOW TO PROFIT FROM VOLKSWAGEN INVESTMENT IN EV MAKER RIVIAN – CHANGING EV LANDSCAPE

Thailand

In the Thailand election, pro-democracy parties have won big.  The top two pro-democracy parties together are projected to win 292 seats out of 500 seats in the lower house.  This is a challenge to the military junta that rules Thailand.

However in Thailand, it is not as simple as the election winner forming a government.  The constitution requires approval of the upper house.  The upper house is dominated by supporters of the military.

Significant uncertainty is ahead on the political front.  However, this uncertainty may bring a major buying opportunity in Thailand.  Thailand has been continuously covered for 16 years in ZYX Emerging.

Turkey

After ruling Turkey with an iron fist, President Erdogan appears to not have won over 50% of the votes in the election.  A runoff election is likely in two week’s time.

There is significant uncertainty ahead.  The uncertainty may bring a major buying opportunity in Turkey. Turkey has been continuously covered for 16 years in ZYX Emerging.

India

Prime Minister Modi’s party BJP has lost the election in the southern state of Karnataka Bengaluru, the capital of Karnataka is the tech hub of India.  The election results have implications for the next general election.  As the uncertainty rises, there may be a dip in the Indian stock market.  Such a dip will be a buying opportunity.  India has been continuously covered for 16 years in ZYX Emerging.

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 fairly 🔒 in silver this morning.

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 bulls are emboldened in that whales supported bitcoin over the weekend.  The speculation was that without whales’ support over the weekend, bitcoin could have fallen below $25,000.

Bitcoin has moved over $27,000 as the feared selloff over the weekend did not happen.

Markets

Our very, very short-term early stock market indicator is 🔒 but expect the stock market to open 🔒.  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 $2021, silver futures are at $24.29, and oil futures are at $70.57.

S&P 500 futures are trading at 4144  as of this writing.  S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

 futures are up 34 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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