PCE 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 compares SPY to Nasdaq 100 ETF QQQ and Apple stock (AAPL).
• Start by focusing on AAPL stock price now vs. AAPL stock price at the June low.
• The chart shows that AAPL stock is about 11% higher compared to where it was during the June low.  SPY is around the June low, and QQQ is slightly higher than the June low.
• In yesterday’s Morning Capsule, we shared with you the reason for AAPL stock to levitate:

During this market decline, Apple stock has continued to levitate.

• Many investors are treating Apple as a safe stock, and they use Apple stock akin to a money market fund.  When they sell other stocks due to a declining market, instead of parking the money in a money market fund, they are parking money in Apple stock.

• AAPL carries a very heavy weight in both SPY and QQQ.  If AAPL falls to the June low, both SPY and QQQ will go lower, breaking June lows decisively.
• The chart shows that AAPL stock is making a lower low.  This has negative implications.
• It is important for investors to understand capitulation because capitulation will provide buying opportunities.  In The Arora Report analysis, as long as investors keep on thinking of AAPL stock as equally safe as a money market fund, there is not likely to be a capitulation.  For a capitulation to occur, investors’ psyche about the safety of AAPL will need to break.  Due to the importance of capitulation to determine the buying opportunity, all investors should consider listening to the podcast titled “The Ten Secrets Of Epic Capitulation Riches.”
• In many ways, AAPL has become the key to the stock market.
• PCE is the Fed’s favorite inflation gauge.  It will be released tomorrow at 8:30am ET.  
  • The consensus is 0.2%.
  • The consensus for Core is 0.4%.  
• As is their pattern, expect the momo crowd to buy ahead of PCE.  The reason the momo crowd buys ahead of important events is because they use the hope strategy without regard to the risk.  On the other hand, smart money is cautious ahead of events because of the risk involved.
• This morning, momo crowd buying is being overcome by selling from the non-momo investors for three reasons.
  • Tomorrow is the month end.  In window dressing, some money managers appear to be selling stocks to show their client that they held cash during the market drop.
  • Yields are rising.
  • Prudent investors are concluding that buying in stocks yesterday on Bank of England saving pension funds from a wipeout was not a good reason to buy stocks.  As a matter of fact, that is a negative development because Bank of England is now working against Prime Minister Liz Truss.  Ideally, both monetary and fiscal policies should be aligned and not fighting each other.  

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

OPEC+ may cut production.

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 under $20,000.

Markets

Our very, very short-term early stock market indicator is 🔒, but expect the momo crowd to try to run up the market ahead of PCE.  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 $1658, silver futures are at $18.62, and oil futures are at $82.36.

S&P 500 futures resistance levels are 3770, 3860 and 3950: support levels are 3630, 3600 and 3520.

DJIA futures are down 219 points.

Bank Of England

Please click here for a chart of  Nasdaq futures (NQ_F).

Note the following:

• Start out by reading yesterday’s Afternoon Capsule.
• The chart shows aggressive buying by the momo crowd in after hours.  The momo crowd was encouraged that their buying was able to hold up the market yesterday.
• The chart shows when the news came that demand for iPhone 14 was faltering, leading Apple (AAPL) to give up on plans to increase production.  Apple had plans to increase production in anticipation of higher demand.
• During this market decline, Apple stock has continued to levitate.
  • Many investors are treating Apple as a safe stock, and they use Apple stock akin to a money market fund.  When they sell other stocks due to a declining market, instead of parking the money in a money market fund, they are parking money in Apple stock.
• The chart shows a drop in Nasdaq stock futures on the Apple news.
• The Apple news triggered a set up for a 5% – 10% drop in the stock market.  
• Across the pond, Bank of England was staring at a financial crash in the UK as large margin calls were coming due today on gilts.  A gilt is a UK government bond issued in sterling.
• Gilts had seen a dramatic fall after UK’s Prime Minister Liz Truss decided she wanted to be Margaret Thatcher and Ronald Reagan but without taking into account different financial conditions at this time. During this high inflationary period, she announced massive tax cuts and energy support to be financed by borrowing.
• The financial markets concluded that her plan was like putting gasoline on the inflation fire.  
• BoE was left with no choice but to proceed with unprecedented intervention on an emergency basis to buy long dated gilts.
• The purchases are designed to move up the gilts to get rid of the margin calls.  Do you still believe that the UK is a capitalist, free market?
• The chart shows when the BoE announcement came.
• The chart shows aggressive buying on BoE announcement.
• BoE has three objectives:
  • Buy long dated gilts
  • Stop selling bonds as they had previously announced to reduce the balance sheet they had built up due to money printing
  • Be ready to raise interest rates
• Without buying bonds, BoE would have needed to raise interest rates by 2% – 3% to rescue the currency, but that would not have avoided the crisis of margin calls on gilts.  Raising the rates would have made already big margin calls significantly bigger.
• As the morning has progressed, momo gurus are busy propagating two new narratives to run up the stock market.
  • BoE has blinked.  The Fed is not far behind.
  • The Apple news is based on data from Apple suppliers – since the data is not from Apple itself, ignore it and buy Apple stock.
• As the new momo narratives spread, the momo crowd is aggressively buying stocks as they are coming to believe that the Fed is about to blink.
• As you read the following, keep in mind that The Arora Report is politically agnostic.  Our sole job is to help investors without a political lens.  Of interest is that we get a large number of emails from our members who are Republicans saying that our writings are sympathetic to Democrats.  We also get a large number of emails from our members who are Democrats  saying that our writings are sympathetic to Republicans.
• In The Arora Report analysis, the new momo narratives are wrong.  
  • In our analysis, despite what you may think about the Biden administration, Biden is highly unlikely to make the same mistake that Liz Truss made.  
  • In our analysis, the Fed is not facing the dire situation that BoE was facing.  The Fed is not about to back off from fighting inflation unless the data changes.  
  • There are five Fed speakers today.  What these Fed officials say may shed some light on their thinking about BoE intervention.
  • Unfortunately, instead of objectively analyzing the Fed speak and helping investors, the five Fed speakers today will provide five opportunities for momo gurus to twist their words to run up the stock market. 
• 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 mostly orange, but has turned solid green as of this writing on aggressive momo buying and lack of smart money selling.

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 range bound under $20,000

Markets

Our very, very short-term early stock market indicator is 🔒 as the market will move based on how successful momo gurus are at twisting the Fed speak.  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 $1643, silver futures are at $18.28, and oil futures are at $79.68.

S&P 500 futures resistance levels are 3770, 3860 and 3950: support levels are 3630, 3600 and 3520.

DJIA futures are up 131 points.

Double Bottom?

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:

• Investors have found several reasons coming together today to buy stocks.  These include a potential double bottom, RSI, yields pulling back, no new large currency moves, and a statement by Chicago Fed Charles Evans.
• The chart shows a potential double bottom is forming.  A double bottom is often a buy signal.  Please note the “?” next to the double bottom on the chart.  The macro picture is not supporting a stock market bottom here, but that does not mean the momo crowd will not run up the market from here as the momo gurus have latched on and proclaimed that a double bottom is in.  
• The chart shows that RSI made a lower low compared to the June 17 low and has now bounced.  There are different interpretations, but momo gurus are latching on to the positive interpretations and ignoring the negative interpretations.
• The chart shows that RSI is bouncing after becoming very oversold.  From a technical perspective, this is positive in the very short term.
• The chart shows the RSI crossing the moving average shown in red.  This is a buy signal in the very short term.
• The chart shows the volume was heavier on Friday; momo gurus are calling it capitulation.  In The Arora Report analysis, the volume was not heavy enough to be a typical capitulation.  Moreover, for capitulation you need to look at 10 different factors.  Most of those factors are not present.  For those wanting next level information, consider listening to the podcast titled “The Ten Secrets Of Epic Capitulation Riches.”
• After an aggressive move up yesterday, yields are pulling back today.  This is bringing more buying into the stock market.
• There have been no new currency debacles this morning.  This is encouraging market bulls.
• Chicago Fed President Evans said, “I‘m hopeful that inflation is going to come down while wage growth can continue at a level so that households can keep up.”
  •  This is encouraging to investors hoping for a soft landing.
  • Hope is great, and we all hope for a soft landing.  However, prudent investors need to be mindful of history.  As we have shared with you before, since the Fed’s founding in 1913, the Fed has managed a soft landing only 10% of the time. 
• There is strong buying in cryptos.  This is encouraging the momo crowd to buy speculative stocks.
• All of the above factors are good to know, but it does not change the following simple facts:
  • Interest rates are still going to go higher.  
  • Wall Street’s earnings estimates are still too high.  
  • For the high interest rates and the inflationary environment, the market valuation is still too high.  
  • Sentiment is too positive for a stock market bottom.  Historically, sentiment becomes very negative at bottoms.  

Durable Goods

Durable goods came at -0.2% vs. -0.1% consensus.

Durable goods ex-transportation came at 0.2% vs. 0.3% consensus.

China

For the first time since 1990, the growth in China is likely to fall behind the rest of Asia.

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

There is heavy buying in bitcoin.  Bitcoin is now above $20,000.

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 $1644, silver futures are at $18.73, and oil futures are at $78.11.

S&P 500 futures resistance levels are 3770, 3860 and 3950: support levels are 3630, 3600 and 3520.

DJIA futures are up 271 points.

Global Currency Breakdown

Please click here for a chart of British pound futures (GBP_F).

Note the following:

• Global currency breakdown is accelerating.  History shows that such events create great opportunities for investors.  
  • Investors need to be patient and not rush in just because the market is down.  It is important for investors to stay fully engaged.  Our experience has shown that investors who do not stay engaged miss out on the best opportunities.  
• The chart shows the collapse in the British pound.
• The collapse in the British pound started when the government announced the biggest tax cuts in 50 years.
  • Investors are worried that this large of a tax cut is like putting gasoline on the fire of inflation.
• There is increasing talk of pound parity with the dollar.  Only days ago parity was unthinkable.  The kind of collapse you see on the chart is a characteristic of emerging markets but not of developed markets such as UK.
• You may ask how is the government going to finance the tax cuts.  The answer of the government is to borrow.  This has spooked investors.
• Intervention in the forex market is not a great option for the Bank of England because it does not have large forex reserves.
• The chart shows that yesterday evening the pound fell under 1.04 to USD.
  • This is the lowest level of the British pound against the US dollar.
• 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 chart shows that the VUD indicator was solid orange indicating net supply during the collapse.
• The chart shows that the pound has rallied off of the lows on speculation that the Bank of England would be forced to raise interest rates in an emergency move by 2%.
• We had previously shared with you that the Chinese currency yuan was reaching China’s red line.
  • China has stepped in to support the yuan.
  • Yuan is at the weakest level since the 2008 financial crisis.
  • Yuan declined about 2%, close to the trading limit.
• There is a report that China has ordered state owned banks to buy stocks to prevent the stock market from falling.  
• How is the momo crowd responding to this global currency upheaval?  The momo crowd is boldly stepping in and buying stocks.
  • This year, buying the dip and not selling the rip has consistently resulted in losses, but don’t tell that to the momo crowd.
    • 2022 is the worst year since the 1930’s for buying the dips in the stock market.
• Investors should be on the lookout for several signs of capitulation before buying.  Please listen to the podcast titled “The Ten Secrets Of Epic Capitulation Riches.”

Fed Speak

This week 12 of the 19 Fed officers are speaking.

• Powell will speak twice.
• All Fed officials are expected to repeat the very hawkish stance.  You would think that such a chorus of hawkish speeches would be negative for the stock market, but the momo crowd’s reality is very different.
• For momo gurus, there will be 13 opportunities to twist the words of Fed officials to attempt to run the stock market higher.

Italy

Giorgia Meloni is likely to become Italy’s new prime minister.  She will be the most far-right prime minister since Mussolini.     

Investors need to carefully watch how her election impacts the situation in Europe.

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

For longer-term, please see oil ratings.

Bitcoin

Some gurus are predicting bitcoin has hit bottom.  As a result, bitcoin is slightly higher.

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 $1651, silver futures are at $18.82, and oil futures are at $78.90.

S&P 500 futures resistance levels are 3770, 3860 and 3950: support levels are 3630, 3600 and 3520.

DJIA futures are down 113 points.