STOCK MARKET BREAKOUT FAILS – SMART MONEY SLAMS BREAKOUT BUYERS

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By Nigam Arora & Dr. Natasha Arora

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

Breakout Fails

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

Note the following:

  • The chart shows that QQQ gapped up in the premarket. There were two reasons behind the gap up.
    • Momo gurus’ new narrative that a new bull market has begun has gotten the momo crowd excited.
    • The Senate passed the Inflation Reduction Act.  The Inflation Reduction Act has billions of dollars of free money.  Investors have fresh memories of what free money can do to the stock market.
    • For details, please read the Morning Capsule.
  • In the Morning Capsule we wrote:

There are three developments that theoretically should take some steam out of the market, but in practice, expect the momo crowd to be oblivious and aggressively buy on the new narrative of a bull market.

  • Popular semiconductor company NVIDIA (NVDA) is unexpectedly lowering its guidance due to lower demand for gaming products.

  • SoftBank (SFTBY) is announcing a record $23B loss for the quarter.  SoftBank has been single handedly responsible for some of the high valuations in the tech sector.

  • Warren Buffett’s Berkshire Hathaway (BKR.B) booked $43.8B loss.  For those interested in deeper knowledge, please listen to the podcast series on stagflation that analyzes 41 stocks in Buffett’s portfolio to give you the knowledge that you need.

  • The chart shows when NVDA issued an earnings warning.
  • The chart shows that the stock market fell on NVDA’s earnings warning.
  • The chart shows the momo crowd bought the tiniest dip.  The momo crowd is back to the same behavior that they had when the stock market was running up on free money.
  • The chart shows when a breakout occurred.  Buying became more aggressive on the breakout.
  • Millions of investors have been taught by the gurus to buy the breakout.   Buying a breakout is a valid strategy, but it is not as simple as it is taught by the momo gurus.  Prudent investors know that a breakout often fails.  Investors need to take into account several other factors before buying a breakout.  More money is lost chasing breakouts than is made indiscriminately buying breakouts. 
  • The chart shows that smart money started selling the strength generated by the breakout buyers.
  • The chart shows that at least temporarily the breakout has failed.
  • The chart shows that as of this writing an attempt to run up the market is starting again.
  • 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 has been orange, indicating a net supply of stocks.
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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 buy 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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See also  WEEKLY STOCK MARKET DIGEST: MOMO CROWD STOPS HUNTED – WALL STREET'S MACHINES SELLING STOCKS – QUAD WITCHING

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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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