WEEKLY STOCK MARKET DIGEST: TWO MAKE OR BREAK EVENTS ARE AHEAD FOR 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.’

CORE PRODUCER PRICE INDEX HOTTER THAN EXPECTED, RUSSIA MAY LOWER OIL OUTPUT

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

Hotter Core PPI

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 no man’s land.
  • The pattern shown on the chart is such that it can easily swing in either direction.  Whichever direction the stock market swings, Wall Street machines will jump on in that direction, exaggerating the move.
  • November Producer Price Index ( PPI) came hotter than expected.   Here are the details:
    • Headline PPI came at 0.3% vs. 0.2% consensus.
    • Core PPI came at 0.4% vs. 0.2% consensus.
    • Food prices surged, but certain staples are falling.
    • A significant part of the rise is in trade services.
  • As we shared with you yesterday, the momo crowd was buying stocks on hope strategy.  Their hope was that PPI would be lower than expected.
  • The momo crowd was aggressively buying stocks on hope strategy in the early trade today prior to the release of the data.
  • Momo gurus are wrong again, but they are very good at crafting new narratives to persuade their followers to buy stocks.  Expect them to try to run up the stock market with a new narrative.
  • Remember, today is Friday.  It is easier to engineer short squeezes on Fridays.
  • A more important CPI number will be released next week ahead of the Fed’s rate decision.
  • Yields are moving up only slightly.

China

China CPI was down 0.2% month-over-month as expected.

In The Arora Report analysis, inflation in China should pick up as China opens.  However, China is not experiencing the same inflation problem as the U.S.

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

Putin has indicated that he may lower oil production.  Previously, Putin had threatened that Russia would not sell oil to any country imposing price caps.

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 🔒.  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 $1810, silver futures are at $23.42, and oil futures are at $72.78.

S&P 500 futures resistance levels are 4000, 4200, and 4318: support levels are 3860, 3770, and 3630.

DJIA futures are down 106 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 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.

See also  WEEKLY STOCK MARKET DIGEST: A GREAT STRATEGY FOR INVESTING IN ARTIFICIAL INTELLIGENCE, RATES HIGHER FOR LONGER

 

CHINA’S CENTRAL BANK BUYS GOLD, MOMO CROWD BUYS STOCKS AHEAD OF PPI

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

China Buys Gold

Please click here for a chart of gold ETF (GLD).

Note the following:

  • The chart shows that there has been a strong up move in gold starting in November.
  • The strong up move in gold shown on the chart is in direct response to the weakening dollar and lower interest rates.
    • Gold is priced in dollars.  For this reason, gold moves up when the dollar weakens.
    • Gold is very sensitive to interest rates. Gold moves up when interest rates go down.
  • The news is that the People’s Bank of China bought 32 tons of gold.  This gold buying is worth about $1.8B.
  • This is the first time China has added to its gold reserves since 2019.
  • Russia Central Bank aggressively accumulated gold ahead of Russia’s invasion of Ukraine.
  • Prudent investors are carefully watching China’s gold buying as one advance indication that China may be planning to invade Taiwan.  If China invades Taiwan, it will have serious consequences for the markets.  For those wanting next level information, please listen to the podcast titled “Prudent Investors: Keep A Close Eye On China And Taiwan.”
  • Assuming China is reporting it correctly, contrary to analysis by others, in The Arora Report analysis, this amount is simply too small to provide any indication.  After this buying, China holds 1980 tons of gold.
  • There has been speculation that in the third quarter central banks have bought 400 tons of gold.
  • Is China reporting its gold buying correctly?  The answer is not known at this time.
  • During this cycle, the money that would have normally gone into gold went into crypto.  It appears that in spite of crypto troubles, investors who went into crypto believing the crypto was digital gold appear to continue to buy crypto and not gold.
  • Jobless claims came at 230K vs. 220K consensus.  The Fed cannot possibly be happy about weekly initial claims not rising in spite of significant interest rate hikes.  The Fed is targeting the labor market.
  • Produceer Price Index (PPI) will be reported at 8:30am ET Friday.   The PPI number can potentially move the market by a significant amount in either direction.
  • As is their pattern, the momo crowd is buying stocks in the early trade ahead of PPI on Friday.  The reason is that the momo crowd uses hope strategy.   They are hoping that PPI will be better than expected.  If PPI is better than expected, the expectation is for stocks to rally.
  • In contrast to the momo crowd, smart money reduces risk ahead of a market moving number.  If PPI is worse than the consensus, the expectation is for the stock market to fall.
  • There may need to be an adjustment to the protection band based on the PPI number.  However, keep in mind that CPI and the Fed meeting are next week and these events can whipsaw the market.

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 🔒 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 🔒.  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 $1801, silver futures are at $23.21, and oil futures are at $75.33.

S&P 500 futures resistance levels are 4000, 4200, and 4318: support levels are 3860, 3770, and 3630.

DJIA futures are up 149 points.

 

UNIT LABOR COSTS STABILIZE THE MARKET AFTER SELLING ON DEMOCRAT WIN AND CHINA DATA

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

Unit Labor Costs

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 rally temporarily failed after penetrating the support/resistance zone.
  • The chart shows that the stock market is now approaching the algo selling line, shown in red.  If the market drops below this line, expect algorithms to start aggressively selling.
  • The initial selling in the early trade was prompted by recession fears, China trade data, and the Democrat win.
  • Chinese trade data was very weak.  Here are the details:
    • Exports came at -8.7% vs. -3.5% consensus
    • Imports came at -10.6% vs. -6.0% consensus.
  • Since China is now opening up, the stock market should quickly recover from this negative Chinese data.
  • First and foremost, at The Arora Report we are politically agnostic.  Our sole job is to help investors, investment advisors, and money managers.  Democrats won the Senate seat in Georgia, taking control of the Senate.  The fear in the stock market is that this will make it easier for more borrowing and spending.  The stock market would have preferred a Republican win and a 50/50 Senate.  However, since the House is controlled by Republicans, it will be difficult to pass any major legislation.
  • The just released unit labor cost data and productivity data is bringing in buying to the stock market.  Here are the details:
    • Q3 Unit Labor Costs – Rev. came at 2.4% vs. 3.5% consensus. In the past, when this number came higher than expected, it spooked the Fed.  The lower unit labor costs number is a relief for the stock market.  
    • Q3 Productivity – Rev. came at 0.8% vs. 0.3% consensus.  This positive data is also helpful for stock market stabilization.
  • As we have been writing, the four keys to the market going forward are PPI, CPI, FOMC decision, and Powell’s press conference.  CPI data is the most important.
See also  MAKE OR BREAK MOMENT FOR AI FRENZY AHEAD – NVIDIA EARNINGS, HOPES DASHED IN U.K.

Eurozone

According to an ECB survey, inflation expectations for the next 12 months rose to 5.4% from 5.1%.

India

The Reserve Bank of India increased its repurchase rate by 35 basis points to 6.25%.  This was in line with expectations.

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 🔒 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 🔒.  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 $1790, silver futures are at $22.59, and oil futures are at $75.15.

S&P 500 futures resistance levels are 3950, 4000, and 4200: support levels are 3860, 3770, and 3630.

DJIA futures are down 15 points.

 

STRENGTH IN SERVICES STOPS MOMO SEASONAL RALLY

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

Strong Services Data

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:

  • Stocks have been rallying hard for the following reasons:
    • Seasonality is positive.
    • As we previously shared with you, momo gurus’ highly misleading narrative that focuses on the Fed slowing rate increases, but not on the terminal rate has taken hold.
    • Momo gurus are projecting S&P 500 to reach 4500 by the end of the year.  This projection is creating FOMO (fear of missing out).
    • Prudent money managers who did not shift gears when the October/November rally started are now being forced to hold their noses and buy stocks.
  • The chart shows that the rally caused the stock market to go into the support/resistance zone.
  • In the Afternoon Capsule, we shared with you that the ISM Non-Manufacturing Index was very strong.  It came at 56.6% versus 53.5% consensus.
  • We shared with you our analysis of the ISM data:

This is a negative for the stock market as it means services are not yet responding to the Fed’s tightening.

  • The chart shows that the stock market fell below the support/resistance zone as smart money sold the strong ISM data.  This is a negative.
  • RSI is now on a sell signal after the strong ISM data but can quickly turn to a buy signal again.
  • On the positive side for the bulls, volume was not heavy on the pullback.
  • The stock market is waiting for a catalyst.
  • The key data ahead is Producer Price Index (PPI) which will be released on December 9 at 8:30am ET.

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 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.

See also  SMARTEST BANKER IN THE WORLD SENDS A MESSAGE TO INVESTORS – ARE YOU LISTENING?

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 🔒.  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 $1792, silver futures are at $22.70, and oil futures are at $75.82.

S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are up 21 points.

 

HONG KONG STOCKS JUMP 4.5% CAUSING U.S. YIELDS TO RISE PUTTING PRESSURE ON U.S. STOCKS

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

Yields Rise

Please click here for a chart of China large-cap ETF (FXI).

Note the following:

  • Stocks in Hong Kong jumped 4.51% as many Chinese cities loosened COVID  restrictions over the weekend.
  • The chart shows that the 30% rally over two weeks is now extending.
  • The chart shows FXI is now at the bottom of the resistance zone. For this reason, the move up from here will be more difficult.
  • The price action on the chart shows a positive pattern.
  • The chart shows RSI divergence.  This is a negative.
  • Buy zones on China related ETFs ASHR, FXI, KWEB, and ECON are in ZYX Emerging.
  • The move up in Chinese stocks on the prospect of China reopening is causing yields to slightly rise in the early trade in the U.S.  
  • Rising yields are putting pressure on U.S. stocks in the early trade.

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 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

OPEC+ left its production unchanged.  The price caps on Russian oil are now in effect.  Russia is declaring that it will not sell oil to any country imposing price caps.  

As a result of the foregoing, oil is rallying.

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.  It appears that whales are succeeding temporarily to convince mom and pop that the bottom is in.

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 opens.

Gold futures are at $1806, silver futures are at $23.07, and oil futures are at $82.38.

S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are down 240 points.

 

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Picture of 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.

Picture of 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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