WEEKLY STOCK MARKET DIGEST: PRUDENT INVESTORS TAKE NOTICE: STRONG CROSSCURRENTS TAKING CONTROL OF THE STOCK MARKET

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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.’

WALL STREET MECHANICS BRING IN STOCK BUYERS AFTER SELL-OFF ON POOR TREASURY AUCTION

November 10, 2023

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

Wall Street Mechanics Kicking In 

Please click here for a chart of 20+ Year Treasury Bond ETF (TLT).

Note the following:

  • The chart shows that TLT fell yesterday.
  • As we shared with you in the Afternoon Capsule, the reason for the fall in TLT was the poor Treasury auction. For details, see yesterday’s Afternoon Capsule.
  • Initially stocks fell on the poor Treasury auction, but the momo crowd bought the dip.  Then came Powell’s statement that he was willing to raise rates if needed.  The poor Treasury auction and Powell’s statement was a one-two punch that brought in more selling yesterday.
  • The chart shows that TLT is being bought this morning but still has a ways to go before reaching the lower resistance zone.
  • This morning Wall Street mechanics are kicking in, bringing in buyers in both stocks and bonds.
  • University of Michigan consumer confidence and inflation expectation data will be released at 10am ET.  The data may be market moving.
  • The biggest data point ahead is CPI that will be released on November 14.
  • Remember that it is Friday, and short squeezes tend to occur on Fridays.  In the early trade, there are signs of a short squeeze.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).

In the early trade, money flows are mixed in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).

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

Retail investors continue to rush to buy bitcoin on hopes that whales will take advantage of low liquidity over the weekend and drive bitcoin (BTC.USD) to $40,000.

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 $1950, silver futures are at $22.48, and oil futures are at $76.51.

S&P 500 futures are trading at 4380 as of this writing.  S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.

DJIA futures are up 137 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 seven 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.

 

GOOD NEWS FOR INVESTORS – AMERICAN MIGHT TEMPORARILY WINS AGAINST IRAN WITHOUT FIRING A SHOT

November 9, 2023

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

Good News

Please click here for a chart of oil futures (CL_F).

Note the following:

  • The chart shows when Hamas attacked Israel.
  • The fear was that Iran would open a second northern front against Israel, escalating the Middle East war.
  • The U.S. responded by sending two aircraft carrier groups to the Middle East to deter Iran and its proxies from opening a northern front against Israel.
  • The falling trendline on the chart shows that investors came to believe there was a rethink in Iran as it appeared not to directly fight the U.S.
  • The latest drop in oil shown on the chart came after the U.S. sent a nuclear submarine.
  • The indication from our sources is that Iran is concluding that fighting the U.S. directly will be a losing proposition.
  • RSI on the chart shows that oil is now very oversold.
  • Temporarily, the U.S. military might has won.  However, prudent investors need to keep in mind that the Middle East is very volatile and things can change very quickly.
  • The U.S. is staying on the offensive.  The latest is that U.S. fighters bombed a weapons depot used by Islamic Revolutionary Guard of Iran in Syria.
  • Oil coming down is deflationary.
  • Oil coming down is raising hopes that the Fed will soon start cutting rates.
  • As speculation builds of the Fed cutting rates, there is a distinct possibility of a second short squeeze leg in bonds.  If the second short squeeze leg in bonds starts, it in turn will trigger another rally in the stock market.
  • For the time being, stocks have to contend with technically overbought conditions.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.
See also  HOTTER PRODUCER PRICE INDEX, THE POWER OF ‘PICKS AND SHOVELS’ PLAY

Jobless Claims

Jobless claims show that the jobs picture remains strong.  Initial jobless claims came at 217K vs. 220K consensus. Jobless claims is a leading indicator and carries heavy weight in our adaptive ZYX Asset Allocation Model with inputs in ten categories.  In plain English, adaptiveness means that the model changes itself with market conditions.  Please click here to see how this is achieved.  One of the reasons behind The Arora Report’s unrivaled performance in both bull and bear markets is the adaptiveness of the model.  Most models on Wall Street are static.  They work for a while and then stop working when market conditions change.

China Facing Deflation

China is facing deflation.  October CPI fell 0.1% vs. 0.0% consensus.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), and Meta (META).

In the early trade, money flows are negative in Tesla (TSLA) and Apple (AAPL).

In the early trade, money flows are mixed in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).

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 (BTC.USD) has moved over $37,000.  Retail investors are rushing into bitcoin on speculation that whales will take advantage of the lack of liquidity over the weekend to run bitcoin to $40,000.

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 opens6

Gold futures are at $1951, silver futures are at $22.76, and oil futures are at $76.42.

S&P 500 futures are trading at 4410  as of this writing.  S&P 500 futures resistance levels are 4460, 4600, and 4713: support levels are 4400, 4318. and 4200.

DJIA futures are up 87 points.

 

STOCK MARKET TRACES A BULLISH PATTERN LAST SEEN 20 YEARS AGO, POWELL SPEECH AHEAD

November 8, 2023

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

Know The Reason Behind The Indicators

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 a bullish pattern that has not been seen since March 2003.
  • The chart shows the 100 day low.
  • The chart shows seven consecutive days up.  The bullish pattern is seven consecutive up days after a 100 day low.
  • March 2003 marked the end of a bear market.  History does not exactly repeat itself, but it is worth paying attention to.
  • The difference from 2003 is that this time the pattern in the stock market resulted from a massive short squeeze in bonds.  Patterns are more reliable when they are not based on market mechanics.  Thank you for your requests for a podcast on this epic move in the stock market and the underlying market mechanics.  We are working on a podcast that will be available in Arora Ambassador Club.
  • RSI on the chart shows that the market is overbought.  Overbought markets tend to be vulnerable to the downside.
  • Powell speaks today.  Powell is expected to try to cool down the rampant speculation in the stock market of interest rate cuts coming soon.
  • Expect momo gurus to use two narratives to persuade their followers to continue to aggressively buy stocks: fight the Fed and do not believe Powell.
  • Zweig Breadth Thrust Indicator completed last Friday.  It is gaining popularity this week as a reason to buy stocks.  This indicator has triggered 18 times since 1945 and has been correct 100% of the time.  It predicts a return of about 25% over the next 11 months.
  • In The Arora Report analysis, investors need to look not only at the breadth and patterns but the reasons behind the patterns.  Here, the reason was a massive short squeeze in the bond market.  Short squeezes tend to end.  As we shared with you yesterday: 

In The Arora Report analysis, the first leg of the short squeeze in bonds is now over.

  • Yields had risen because of the massive upcoming supply of Treasuries due to excessive government spending.  This reason is still there. The Arora Report was one of the first to alert investors of the massive upcoming Treasury borrowing.  Subsequently, we shared with you:

From October to December, the Treasury will borrow $776B.  In The Arora Report analysis, this amount is $76B less than the consensus.

  • The Treasury is still going to borrow a massive amount.  We also previously wrote:

That is $1.592T of borrowing over six months.

  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.
See also  MOTHER OF ALL REPORTS WILL DETERMINE STOCK MARKET DIRECTION

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).

In the early trade, money flows are mixed in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).

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

API crude inventories came at a build of 11.9M barrels vs. a consensus of a draw of 0.3M 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 (BTC.USD) is range bound.  Bitcoin bulls are hoping the whales will drive it over $40,000 this weekend.

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 $1970, silver futures are at $22.73, and oil futures are at $76.86.

S&P 500 futures are trading at 4398 as of this writing.  S&P 500 futures resistance levels are 4460, 4600, and 4713: support levels are 4318, 4200, and 4000.

DJIA futures are up 48 points.

 

STOCK MARKET PAUSES AFTER BOND SHORT SQUEEZE TRIGGERED EPIC RALLY, APPLE RECOVERS

November 7, 2023

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

The Next Trigger

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 now moved above the top support zone.
  • The chart shows that the move down below the top support zone in late October has temporarily proven to be a bear trap.
  • RSI on the chart shows that the stock market is overbought.  Overbought markets tend to be vulnerable to the downside.
  • As we have shared with you before, three macro events triggered a vicious short squeeze in bonds, which in turn, led to an epic rally in stocks.
  • In The Arora Report analysis, the first leg of the short squeeze in bonds is now over. 
  • There is Fed speak from Neel Kashkari and Austin Goolsbee.  Powell will be speaking later in the week.
  • It is clear from the Fed speak that there is not clarity at the Fed regarding the following:
    • The real reason behind the rapid rise in long term rates in October
    • Implications now for future Fed policy of long term rates pulling back since Wednesday last week
  • In The Arora Report analysis, the stock market is looking for a trigger for the next move. 
  • On the positive side, Apple stock (AAPL) has recovered after a weak earnings report.  In The Arora Report analysis, it is important to pay attention to the price action in AAPL because it is an indication of investor sentiment.
  • On the earnings front, there is positive news in three areas important to the economy.
    • Data analytics company Datadog (DDOG) reported good earnings.  This is bringing buying this morning in many stocks that have a positive readthrough from Datadog such as Snowflake (SNOW) and MongoDB (MDB).  SNOW and MDB are in the ZYX Buy portfolio that surrounds that core Model Portfolio.
    • One of the largest home builders D.R. Horton (DHI) is guiding Q1 revenues above expectations.  Home builders continue to benefit from a lack of supply of existing homes because homeowners who have locked in a 3% mortgage do not want to sell.
    • Earnings from semiconductor company NXP Semiconductors (NXPI) are in line with expectations.  NXPI is a major supplier of semiconductors to the automotive industry.  After bad earnings from ON Semiconductor (ON) and Wolfspeed (WOLF), the fear was that NXPI would report bad earnings.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), and Meta (META).

In the early trade, money flows are negative in Apple (AAPL), Nvidia (NVDA), and Tesla (TSLA).

In the early trade, money flows are mixed in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).

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 (BTC.USD) is range bound.

Markets

Our very, very short-term early stock market indicator is ***.  Whichever direction the market starts moving, Wall Street machines will jump in that direction, exaggerating the move.  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 $1970, silver futures are at $22.67, and oil futures are at $79.18.

S&P 500 futures are trading at 4380 as of this writing.  S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.

DJIA futures are down 75 points.

 

BUFFETT HOLDING RECORD CASH, VICIOUS SHORT SQUEEZE RESPONSIBLE FOR LARGE STOCK GAINS

November 6, 2023

See also  INFLATION HOTTER THAN EXPECTED BUT MOMO GURUS HAVE A NEW NARRATIVE TO BUY STOCKS

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

Change in 60/40 Portfolio

There is a change in the 60/40 Portfolio.  Please scroll down for details.

Buffett Cautious

Please click here for a chart of Berkshire Hathaway stock (BRK.B).

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of BRK.B stock is being used to illustrate the point.
  • The chart shows the stock of Warren Buffett’s company Berkshire Hathaway broke out earlier this year.
  • The chart shows that the breakout failed.
  • The chart shows a big rally in BRK.B stock last week.
  • The latest report shows that Buffett is holding record cash of $157B.
  • At a time when Buffett is holding record cash, his stock portfolio shrank from $353B at the end of the prior quarter to $319B at the end of the last quarter.
  • Buffett’s major holdings, Apple (AAPL), American Express (AXP), and Coca-Cola (KO), all showed losses.  You will benefit from analysis of all 41 stocks in Buffett’s portfolio.  The easiest way is to listen to the podcast series analyzing all 41 stocks in Buffett’s portfolio in Arora Ambassador Club.
  • You may be wondering where Buffett is holding his cash.  He is holding his cash in T-bills.  Holding cash in T-bills has been The Arora Report’s recommendation.  Please see the “Protection Band And What To Do Now” section below. 
  • Thank you for all of your questions wanting to know why the stock market rally was so explosive last week.  Here is your answer.  Hedge funds had a record negative positioning in Treasuries.  When Treasuries moved higher in response to three macro events that we shared with you in the Capsules last week, a massive short squeeze in Treasuries took place.  The movement in Treasuries, in turn, caused the largest rally in stocks.  Many of you are also asking for an in-depth podcast on this subject as many investors believe they will benefit from a better understanding.  We agree.  We are starting work on a podcast on this subject.  The podcast will be available in Arora Ambassador Club.
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.
See also  WEEKLY STOCK MARKET DIGEST: MARKET MECHANICS HAVE TAKEN OVER, SEASONALLY POSITIVE NOVEMBER UNDERWAY IN THE STOCK MARKET

South Korea Bans Short Selling

South Korea has banned short selling until June 2024.  This has triggered a massive rally of 5.7% in Korean stocks.  There may be a good trade developing here.  There will be a post in ZYX Emerging.  ZYX Emerging has continuously covered Korea for 16 years.

Japan

Stocks in Japan rose 2.4% as investors believe that Bank of Japan (BOJ) policies will cause money to flow out of the U.S. and into Japan.  Two Japan ETFs are in ZYX Allocation.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), and Tesla (TSLA).

In the early trade, money flows are negative in Apple.

In the early trade, money flows are mixed in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).

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

Saudi Arabia is extending its production cuts. 

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 (BTC.USD) is range bound.

Markets

Our very, very short-term early stock market indicator is ***.  Whichever direction the market starts moving, Wall Street machines will jump on in that direction, exaggerating the move.  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.

See also  AMAZON TO MAKE ‘TENS OF BILLIONS’ FROM AI, CONSUMER BINGE CONTINUES, US ATTACKS TARGETS IN SYRIA

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 $1993, silver futures are at $23.29, and oil futures are at $81.90.

S&P 500 futures are trading at 4384 as of this writing.  S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.

DJIA futures are up 31 points.

 

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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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