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

Twisting The Facts

Please click here for a chart of Amazon (AMZN).

Note the following:

• The most important data this morning is the release of PCE, the Fed’s favorite inflation gauge.  Here are the details:
  • PCE came at 0.3% vs. 0.3% consensus.
  • Core PCE came at 0.5% vs. 0.4% consensus. 
  • Momo gurus were predicting that PCE would come less than expected and that was the reason to buy stocks.
  • Momo gurus have been proven wrong again.  You already know that their job requires them to twist the facts to persuade investors to buy stocks.  The new twist appears to be that there was no surprise in PCE and that is the reason to buy stocks.
• In The Arora Report analysis, the Fed will be paying close attention to Core PCE, and this number is way hotter than what the Fed wants.  
• Personal income came at 0.4% vs. 0.3% consensus.  This indicates that the Fed’s rate hikes so far have not impacted the continuing rise in income.  In The Arora Report analysis, the Fed is aiming to reduce the rise in personal income to contain inflation.  
• Personal spending came at 0.6% vs. 0.4% consensus.  The U.S. economy is 70% consumer based.  Therefore, it is important for investors to pay attention to personal spending. In The Arora Report analysis, the latest data shows that consumers continue to spend and consumer spending has not slowed because of the Fed’s rate hikes.  The Fed will certainly be taking notice of this data.  
• In simple words, incomes are still going up and consumers are still lavishly spending.  Both of these need to change to reduce inflation.
• Going into yesterday’s close, three of the top five tech stocks, Microsoft (MSFT), Google (GOOG, GOOGL), and Meta (META) had given weak guidance.  Momo gurus were urging their followers to buy stocks contending that Apple (AAPL), and Amazon (AMZN) would give great guidance.
• To the dismay of momo gurus, AAPL implied weak guidance, and AMZN gave very weak guidance.
• The chart shows when AMZN earnings were released.
• The chart shows that AMZN stock fell about 20%.  In The Arora Report analysis, considering the details of the weak guidance, the first reaction in AMZN stock, shown on the chart, was appropriate.
• The chart shows that aggressive buying ensued in AMZN stock.
• AAPL does not give formal guidance, but their comments on the conference call clearly implied that a weak quarter is ahead.  The dip in AAPL stock was aggressively bought.
• Now all five of the mega tech stocks have given weak guidance.  Momo gurus have now changed their narrative to this is the bottom in weakness without any facts to back up such an assertion.  In The Arora Report analysis, digging into the earnings of all five mega tech stocks, the indication is that the probability of further weakness is very high.  
• It is not all doom and gloom, here are the positives for the stock market.
  • Market technicals are positive.  
  • Many mutual funds and other funds have October 31 as their year end.  Managers of such funds have apparently concluded that their investors want them to be fully invested – these funds are aggressively buying stocks.  
  • Earnings from non-tech companies are coming in better than expected.
  • The market is entering a positive seasonal period.
  • Midterm elections are ahead.  In 18 out of the 18 last midterm elections, the market ran up after the election irrespective of who won.
  • Polls are showing the Republicans are gaining going into the election.  The market likes a potential Republican win as it will cause a stalemate in Washington.  The market always likes a stalemate in Washington.
  • Momo gurus are highly skilled at twisting the data and are seeing tremendous success in persuading their followers to continue to buy stocks all the way down from the top to here.
• Due to the 40-year secular bull market, investors have been conditioned to believe that bear markets are always brief and the market always goes up.
• In The Arora Report analysis, there is a high conviction call from The Arora Report that the four mega trends driving the 40-year secular bull market have ended.  For this reason, there is more uncertainty about the future than there was at any time during the last 40 years.  Due to the high importance of this call, the live event “A Forward Look At Investing 2023 – 2030” is scheduled for December 3.  Thank you for the hundreds of excellent questions we have received for the live event.

Brazil

The runoff election between Lula and Bolsonaro is set for Sunday. In opinion polls, Bolsonaro is outperforming expectations but still polling at 47% vs. 53% for Lula.

Europe

There is significant economic data released across Europe today.  Overall, the data shows high inflation and slowing growth. Of special note is that Volkswagen (VWAGY), one of the largest auto manufacturers in the world, has lowered its delivery forecast.

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 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 is range bound.

Markets

Our very, very short-term early stock market indicator is 🔒 but can quickly turn 🔒 if the non-momo crowd starts 🔒.  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 $1646, silver futures are at $19.20, and oil futures are at $88.22.

S&P 500 futures resistance levels are 3860, 3950 and 4000: support levels are 3770, 3630 and 3600.

DJIA futures are up 135 points.

Protection Bands And What To Do Now?

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

Consider continuing to hold 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.

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

Pricing Pressures Ease

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 yesterday and earlier today, the market went above the top band of the support resistance zone.
• The chart shows that RSI is overbought, but the pattern traced by RSI is a bullish pattern.  This indicates that technically, the market is set up for a strong rally if Apple (AAPL) and Amazon (AMZN) earnings are good and PCE data is better than expected.
• Significant economic data has been released this morning.
• The most important is Q3 Chain Deflator – ADV.  It came at 4.1% vs. 5.3% consensus.  The prior was 9.0%.  This indicates that pricing pressures are easing.  
• Q3 GDP – ADV came at 2.6% vs. 2.3% consensus.  The Arora Report has previously disagreed with experts who were saying that the economy is in a recession.  The GDP number proves that such experts were wrong.  The Arora Report call has proven spot on.  To learn more, please listen to the podcast titled “Recession: What You Need To Know To Gain An Edge.”
• Initial jobless claims came at 217K vs. 220K consensus.  This is a very strong number, indicating that the job market is still very strong. Don’t let the news of layoffs fool you.  Layoffs are occurring primarily in technology companies that have become bloated, feasting on free money and the momo crowd’s willingness to buy their stocks at higher and higher prices with total disregard for valuations.  Outside technology, speculative companies, and companies funded by the meme and momo crowds as well as venture capitalists, so far the evidence is that the jobs picture is bright.
• Durable orders came at 0.4% vs. 0.6% consensus.  Durable orders ex-trans came at -0.5% vs. 0.2% consensus.
• There are good earnings from Caterpillar (CAT), Honeywell (HON), and McDonald’s (MCD). These three companies are DJIA components.  In The Arora Report analysis, inflation is helping these companies.  These companies have been able to raise prices because of inflation, and this simply increases their revenues.  
• Overall in this earnings season, earnings are coming in-line with expectations with the exception of technology companies.  So far, earnings of technology companies are worse than expected
  • Ironically, the portfolios of many investors who are not members of The Arora Report are mostly in technology stocks and cryptos.  There are reports that many such portfolios are down 60% – 70% for the year.  Those who focused on call options on technology stocks have lost 80% – 90% of the value of their portfolios.  

European Central Bank

The European Central Bank (ECB) has raised its interest rates by 75 basis points in-line with expectations.  Here are the key points:

• ECB expects to raise interest rates further.
• ECB’s medium term inflation target remains at 2%.
• Inflation remains too high – euro area inflation reached 9.9% in September.

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 🔒 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 trading 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 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 $1661, silver futures are at $19.40, and oil futures are at $89.08.

S&P 500 futures resistance levels are 3860, 3950 and 4000: support levels are 3770, 3630 and 3600.

DJIA futures are up 384 points.

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

Weak Earnings

Please click here for a chart of Microsoft (MSFT).

Note the following:

• Yesterday after market close, earnings were released from Microsoft (MSFT), Alphabet (GOOG, GOOGL), and Texas Instruments (TXN) providing robust data points for objective analysis.
• We previously shared with you that Wall Street positioning in MSFT and GOOG ahead of the earnings was positive.  The price action shows that understanding positioning can give you an edge.  For those who want to understand positioning and gain an edge, listen to the podcast “Market Mechanics: Positioning.”
• The chart shows when MSFT earnings were released.
• The chart shows that the first dip was bought by the momo crowd.
• The earnings showed there was weakness in PCs, software, cloud, and overall corporate IT spending.
• Our algorithms show that smart money sold right after the earnings, preventing a rally in the stock.
• 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 stock price drifted lower due to smart money selling going into the conference call, but the VUD indicator stayed positive due to aggressive buying by the momo crowd.  The chart shows the reaction in the stock on weak guidance.  The reaction was severe due to positive positioning ahead of earnings.  
• The chart shows that the VUD indicator was solid orange, indicating net supply of stocks after guidance was given.
• You may be wondering how is the momo crowd responding to broad weakness in IT as evidenced by MSFT earnings?
• The momo crowd is buying PC, software, and cloud stocks in the early trade.
• Why is the momo crowd buying these stocks in spite of weakness in their sectors?  Often, the momo crowd gets in the mode of buying whatever has news – good or bad.  This is one of those times. 
• Alphabet earnings were also weak due to a broad weakness in advertising.  We have previously shared with you that advertising is one of the first cuts made by CEOs during a recession. 
• In the Arora Report analysis, weakness in YouTube was expected but the weakness in the search advertising is concerning. 
• How is the momo crowd responding to broad weakness in advertising?  They are buying shares of SNAP.  SNAP is dependent on advertising and is nowhere as robust as GOOG.  We previously shared with you that SNAP shares were crushed when the company was unable to provide fourth quarter guidance due to lack of visibility.  Please click here for a chart showing how SNAP responded to earnings.
• TXN is a supplier of a broad range of semiconductors.  In The Arora Report analysis, weakness in PCs and phones was expected, but the concern is that the TXN report is showing broad weakness in the industrial sector.  Until now the industrial sector has been strong. 
• How is momo crowd responding to the weakness in semiconductors?  They are buying semiconductors in the early trade.
• Seagate (STX) is a major supplier of disk drives. Earnings released this morning are showing major weakness.
• The momo crowd buys ahead of the events on hope strategy.  Now that they have been proven wrong on GOOG and MSFT, they are buying hoping for good earnings from Facebook (META) today and good earnings from Apple (AAPL) and Amazon (AMZN) tomorrow.
• Looking ahead, PCE data will be released on Friday.   This is the Fed’s favorite inflation gauge.
  • The consensus for PCE is 0.3% month-over-month.
  • The consensus for core PCE is 0.4% month-over-month.
  • If the numbers come in line with the consensus, expect momo gurus to multiply 0.3% by 12 and attempt to run up the market saying that inflation is running at 3.6%. 
• In spite of the selling in the early trade, keep in mind the following:
  • Seasonality is about to turn positive.
  • The stock market tends to run up going into midterm elections and after the elections.
• The Fed meeting starts on November 1, and the rate decision will be on November 2.

China

China is selling dollars to support the yuan.  There are also reports that Chinese banks continue to buy stocks on government orders.

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 lightly 🔒 gold 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 seeing buying and is now over $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 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 $1670, silver futures are at $19.46, and oil futures are at $86.34.

S&P 500 futures resistance levels are 3860, 3950 and 4000: support levels are 3770, 3630 and 3600.

DJIA futures are down 90 points.

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

A Positive Pattern

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 a potential inverse head and shoulders pattern is forming.  An inverse head and shoulders pattern is a positive pattern.  In the absence of news and macro developments, an inverse head and shoulder pattern works about 65% of the time.
• “S” on the chart denotes the shoulders.  “H” denotes the head.  “N” denotes the neckline.
• The chart shows that the market is right at the neckline.  It is not yet known if the pattern will be successful.
• In The Arora Report analysis, the success of this pattern will come down to earnings.  If earnings are better than expected, the pattern will be successful and vice versa.
• The chart shows that RSI is overbought.  A pullback is natural when RSI gets this overbought this quickly.  In the early trade, the market is seeing a shallow pullback.
• There are many scenarios possible.  The highest probability scenario as of this writing is a short term rally in stocks and a short term rally in bonds going into the year end.  However, in addition to earnings, there are three important events ahead that may totally change the picture:
  • Earnings
  • The Fed meeting
  • CPI and PPI reports
• Important earnings from Microsoft (MSFT) and Alphabet (GOOG) are ahead after the close.
• The latest polls for the election are leaning towards a Republican win.
• The stock market has gone up after the last 18 midterm elections, irrespective of who won.  If Republicans win, the market is likely to celebrate with a bigger move higher.
• The seasonality is positive.
• When it is all said and done, what the Fed says will trump everything.

Germany

German Ifo Business Climate came at 84.3 vs. 83.3 consensus.

This better than expected number is responsible, along with overbought RSI, for a shallow pullback in the early trade.  Remember that the momo crowd does not like good economic numbers.  The momo crowd wants the economy to weaken to force the hands of the Fed and European Central Bank (ECB) to not fight inflation. 

China

There are unconfirmed reports that China is ordering banks to buy stocks to prevent Chinese stocks from falling.  

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.

Markets

Our very, very short-term early stock market indicator is 🔒 but can easily swing either way.  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 $1646, silver futures are at $18.83, and oil futures are at $84.43.

S&P 500 futures resistance levels are 3860, 3950 and 4000: support levels are 3770, 3630 and 3600.

DJIA futures are down 106 points.

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

Money Flees China

Please click here for a chart of Hong Kong Large Cap ETF FXI.

Note the following:

• The world is interconnected, but don’t tell that to the momo crowd.
• Significant developments are happening overseas that will impact the U.S. stock market sooner or later.  Prudent investors need to keep a close eye on these developments.
• The chart shows a significant gap down in Hong Kong stocks.
  • Hong Kong stocks fell 6% to a 13 year low.  This was the worst drop since the 2008 financial crisis.
• Today, foreign investors are starting a mass exodus from China. The trigger is three-fold:
  • President Xi’s statement about Taiwan.  Prudent investors need a deep understanding of the Taiwan situation.  The podcast titled “Prudent Investors: Keep A Close Eye On China And Taiwan” is in post production.
  • President Xi’s emphasis on ‘common prosperity.’  The interpretation is that the Chinese Communist Party does not want private companies to make large profits.  Paradoxically, while smart money is fleeing China, the momo crowd is buying stocks of companies that generate significant profits from China such as Apple (AAPL), Tesla (TSLA), Nike (NKE), Nvidia (NVDA), and Starbucks (SBUX).
  • President Xi has tightened his grip on the Chinese Communist Party.  The most powerful body is the Politburo Standing Committee; it has six members.  Now all six members are “yes men” to President Xi.  The concern among investors is that this will make President Xi even more assertive, and there is no one to tell him when he is wrong.
• Japan became a pacifist nation after its defeat in World War II.  Article 9 of the Japanese constitution renounces war as a sovereign right of the nation and the threat or use of force.  Investors should note that now there is an intelligence report that Japan is considering developing counterattack capabilities to take out China’s military command and control infrastructure.  This new development is waking up investors all across the globe on the dangers ahead.
• There is another significant development that is not being adequately covered in the media.  Japan and Australia on Saturday executed a security agreement against the Chinese threat.
• We have previously shared with you that the four mega trends have ended that drove the 40 year long secular bull market interrupted by cyclical bear markets.  The foregoing developments increase our conviction in our call.  The media is oblivious and so are most investors.  The Arora Report call of the four mega trends ending is a high conviction call just like our other major calls over the years that nobody was talking about when they were made but subsequently were proven spot on.  Money is to be made in the future, but investors will have to behave differently.  Due to the high importance of this call, a live event is scheduled for December 3.  The event will include Q&A.  We have already received excellent questions from hundreds of our members.  If you would like your questions to be considered, register for the event and fill out the form with your questions.
• Over the weekend, there was significant bullish chatter about the stock market on social media.  Most retail investors do not realize that the chatter on social media about the stock market is not organic, but engineered with bots to suck in retail investors.  Many retail investors carefully study social media over the weekend, and influenced by the chatter, buy stocks on Monday morning.  This is exactly what is happening this morning with aggressive buying of stocks in the early trade.
• Last week, The Arora Report call was for a short term rally, and the top band of the protection band was reduced to allow for tactical trades from the long side.
• Major earnings are ahead. These earnings will propel the market higher if they are better than expected and vice versa.
  • Alphabet (GOOG) and Microsoft (MSFT) will report on Tuesday after the market close.
  • Apple (AAPL) and Amazon (AMZN) will report on Thursday after the market close.
• Wall Street is positioned for earnings from these mega caps to come better than consensus.
• Positive seasonality is ahead.
• Stocks tend to run up going into the midterm election and after the election irrespective of who wins.

Forex Bonfire

The Bank of Japan  (BOJ) has just thrown $30B in the forex bonfire to defend the yen.  In The Arora Report analysis, this intervention is not likely to succeed.  In September, the BOJ spent $20B to prevent the yen from falling further.  The yen is now lower than when the BOJ intervened in September. In The Arora Report analysis, BOJ’s policy is not sustainable.  If and when BOJ gives up, it will have major negative implications for markets across the globe including U.S. stock and bond markets.

U.K.

Tory MPs are overwhelmingly backing Rishi Sunak to become the next prime minister.  This is a win for prudent fiscal policies and away from populous policies of borrowing and spending.

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 🔒 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 can quickly turn 🔒.  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 $1654, silver futures are at $19.16, and oil futures are at $83.73.

S&P 500 futures resistance levels are 3860, 3950 and 4000: support levels are 3770, 3630 and 3600.

DJIA futures are up 217 points.