Dollar Weakness Is The Real Driver

Please click here for a chart of U.S. Dollar Index (UUP).

Note the following:

• It is Veterans Day.  The bond market is closed.  We would like to thank and honor all veterans for their service.
• In addition to CPI and China, dollar weakness is the real driver behind the stock market rally.
• The chart shows a triple top.  A triple top is bearish for the dollar.
• The chart shows that the dollar has broken below the trend line.  This is bearish for the dollar.
• The chart shows that RSI is oversold.  This indicates that the dollar can easily see a bounce.  If the bounce is significant, in the absence of the momo crowd, the stock market would pull back.  However, this is only theoretical because the momo crowd is real and powerful.  The momo crowd does not do any analysis.
• Dollar weakness is a double-edged sword.
  • S&P 500 companies derive significant earnings from abroad.  When the dollar weakens, the earnings from abroad are higher when converted into dollars.  This is a positive.
  • Right now, the stock market is ignoring the other side.  When the dollar weakens, it adds to inflation because imported goods cost more.  
• China is adding to the CPI euphoria to buy stocks.
  • Stocks in Hong Kong are up 7.74%.
  • China has reduced the amount of quarantine time for those entering China.
  • China has also reduced the quarantine time for close contacts of COVID19 patients.
• Preliminary University of Michigan consumer sentiment data will be released at 10am ET.  The consensus is 59.6.  Investors will also be paying attention to inflation expectations data.  This has the potential to be a market moving event.

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 staged a rally yesterday along with the massive rally in speculative stocks.  The momo crowd aggressively bought the dip in bitcoin.  This morning bitcoin is pulling back as the crypto reality begins to set in.  Contributing to investors understanding the reality is that BlockFi has stopped withdrawals.

Markets

Our very, very short-term early stock market indicator is 🔒 and can swing either way based on University of Michigan data.  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.  However, there is no liquidity due to the holiday.

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 $1768, silver futures are at $21.71, and oil futures are at $89.24.

S&P 500 futures resistance levels are 4000, 4200, and 4318: support levels are 3950, 3860, and 3770.

DJIA futures are up 98 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 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 band 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.

Reduce Cash And Hedges

Consider reducing cash and hedges on better inflation data.

Be forewarned that the changes may need to be reversed quickly as new data comes in.  Make changes based on your ability to be nimble.

This change is to be considered tactical and not strategic.  There are still many risks ahead.

Buy Zones

Within the protection bands and based on personal risk preference, consider buying stocks and ETFs that are in the buy zone.  Even though the momo crowd is likely to run up the market, in your buying, consider your own risk preference because many risks are still ahead.

CPI

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:

• CPI came much better than expected.  Here are the details:
  • Headline CPI came at 0.4% vs. 0.7% consensus.
  • Core CPI came at 0.3% vs. 0.5% consensus.
  • Jobless claims came at 225K vs. 220K consensus.
• The chart shows that the stock market is rocketing and has reached above the top band of the support/resistance zone.
• 10-year yield has fallen below 4% giving additional lift to tech stocks.
• Even though inflation numbers have come down, the probability of stagflation is very high.  It is important that investors learn deeply about how to invest in a stagflationary environment.  Consider listening to the five part podcast series on stagflation.  

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 🔒 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 🔒 oil in the early trade.

For longer-term, please see oil ratings.

Bitcoin

After falling yesterday, bitcoin is moving up on CPI data. Bitcoin is trading at $17,449 as of this writing.

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 $1737, silver futures are at $21.86, and oil futures are at $86.99.

S&P 500 futures resistance levels are 3950, 4000, and 4200: support levels are 3770, 3630, and 3600.

DJIA futures are up 779 points.

Murky Outcome

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:

• Stock market bulls are disappointed that there is no red tsunami, but they are hanging in tough on hopes of a better than expected CPI tomorrow
• Republicans will likely control the House by a small margin.  The Senate is still undecided as three key races are too close to call.
• Here are the expectations for CPI tomorrow.
  • Consensus for CPI is 0.7%.
  • Consensus for Core CPI is 0.5%.
• Momo gurus are predicting that CPI tomorrow will be better than expected.
• In The Arora Report analysis, sometimes based on other data, it is possible to say ahead of time if CPI would be better or worse than the consensus.  However, this time it is simply not possible to make such a call with a high degree of confidence.
• The chart shows that the market is in the support/resistance zone and can easily move either way.
• The chart shows that RSI is at a point where it can easily move either way.
• Crypto problems are hurting the sentiment in some corners of the stock market. Please see the “Bitcoin” section below.
  • The reason that crypto is hurting the sentiment in the stock market is because many investors who own a large amount of crypto also own large positions in long duration speculative stocks.
• META is laying off 11,000 employees.

China – Deflation

At a time when the world is worried about inflation, there is a risk of deflation in China.  Producer Price Index fell 1.3% year-over-year vs. a drop of 1.5% consensus.

The divergence between China and other countries means that China may gain market share in the global markets.

Momo Crowd And Smart Money In Stocks

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

Gold

Money is flowing into gold on the crypto debacle.

Gold has broken above $1700.

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 data came at a build of 5.618M barrels vs. consensus of a build of 1.1M 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 $18,000.

Crypto bulls have been promoting decentralization as a big advantage of crypto.  If Binance completes its acquisition of international operations of FTX, Binance will control about 80% of the market.   

In yesterday’s Morning Capsule we shared with you that FTT token had fallen from $22 to as low as under $16. FTT is now trading at $4.38.  This illustrates the amount of carnage in crypto.

The net worth of FTX founder Sam Bankman-Fried has fallen in a matter of a couple of days from $16B to under $1B.

Of note is that blue chip VCs were falling over themselves to give $400M to FTX at an eye popping valuation of $32B in October 2021.  FTX is likely worth less than $1B now.

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 strong.

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 $1711, silver futures are at $21.26, and oil futures are at $88.29.

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

DJIA futures are down 190 points.

Investor Optimism

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 in the support/resistance zone.
• The chart shows RSI can go either way.
• Wall Street positioning going into the election is positive.  Understanding positioning can give you an edge.  To develop deep knowledge of positioning, listen to the podcast titled “Market Mechanics: Positioning.”
• Due to the positive positioning of Wall Street, if Republicans do not capture the Senate, there is a fair probability of a quick selloff.
• The stock market has gone up after a midterm election 18 of the last 18 times.
• The S&P 500 has gained an average of 6.3% based on data all the way back to 1930 in the three months following the midterm election.
• As most investors are focused on the election, prudent investors should be thinking about Consumer Price Index (CPI) data that will be released on November 10 at 8:30 am ET.
  • Consensus for CPI is 0.7%.
  • Consensus for Core CPI is 0.5%.
• In The Arora Report analysis, the near term direction of the stock market will be dictated by CPI.

China

There is a report that China has increased oil imports in preparation for reopening.

Europe

Eurozone Retail Sales came at 0.4% vs. 0.4% 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 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 falls under $20,000  on contagion risk as the token of crypto exchange FTX falls.  This appears to be due to the conflict between FTX and Binance.  Binance is the world’s largest crypto exchange.

A whale sold FTT pushing it down to under $16 from about $22. FTT has since bounced and is trading above $17 as of this writing.

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 $1676, silver futures are at $20.82, and oil futures are at $91.39.

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

DJIA futures are up 124 points.

Apple Gut Punch

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 with Dow Jones Industrial Average ETF (DIA), Nasdaq 100 ETF (QQQ), Amazon (AMZN) stock, and Apple (AAPL) stock. For most of the year, as tech stocks cratered, Apple held up propping up the market since Apple carries a heavy weight in the indexes.
• As of Friday, Apple stock was worth more than Amazon, Alphabet (GOOG, GOOGL), and Meta (META) combined.
• The chart shows the dramatic difference between the performance of Apple stock and Amazon stock over the last month.
• On Sunday night, Apple announced a gut punch.  The fourth quarter is the most important quarter for Apple.  iPhone 14 Pro and iPhone 14 Pro Max production has been significantly cut due to Covid restrictions in China.
• In The Arora Report analysis, Apple is not likely to meet its earnings estimate for the fourth quarter.
• We have been sharing with you for a while that Wall Street earnings estimates are too high. This Arora call is about to be proven spot-on.  Now, anyone can compute gross margins on earnings announced this quarter to see that Wall Street’s earnings estimates are unrealistically high.  Goldman Sachs (GS) has lowered its earnings estimates for next year to flat vs. the prior estimate of 3% growth.  It is only a matter of time before other Wall Street firms will have no choice but to lower earnings estimates.
• Last night stock futures were seeing significant selling on the Apple news,  lower earnings estimates, and Meta, the parent of Facebook,  starting large-scale layoffs.
• This morning, stock futures have flipped positive on aggressive buying on hopes of a Republican win in the midterm election.
• Here is a question that prudent investors need to ask, “Sure hope is eternal, but how long can the momo crowd ignore the bad news and keep on buying?”

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 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 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 $1679, silver futures are at $20.78, and oil futures are at $92.10.

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

DJIA futures are up 127 points.