WEEKLY STOCK MARKET DIGEST: YEAR END TAX LOSS SELLING OVERCOMING POSITIVE SEASONALITY IN 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.’

INVESTORS FOCUS ON SEASONALITY AND POSITIVES FROM NIKE AND FEDEX EARNINGS TO BUY STOCKS

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

Positive Seasonality

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 approached the bottom of the support/resistance zone.  This is a natural place for the stock market to bounce, and that is exactly what the stock market is doing this morning in the early trade.
  • RSI shown on the chart has stabilized around 40 giving comfort to those who want to buy here.
  • The seasonality between here and the year end is positive.  Many investors are focused on the seasonality and are buying in the early trade.
  • After the close, two important companies FedEx (FDX) and Nike (NKE) reported earnings.
  • Both companies have positives and negatives in their earnings reports.
  • In the early trade, investors are focused only on the positives from FedEx and Nike earnings and are ignoring the negatives.  
  • Momo gurus are using the positives from Nike and FedEx earnings to add to their narrative to persuade their followers to buy stocks.
  • Keep in mind that starting today, liquidity is drying up as senior personnel go on vacation leaving junior staff to man trading desks.  It is easy to push the stock market higher when liquidity is low.
  • On the flip side, many sophisticated investors are convinced that Wall Street earnings estimates are too high and the stock market will fall in January.  Expect many such investors, including hedge funds, to use the strength to sell.
  • As an actionable item, pay attention to the “Protection Bands And What To Do Now” section below.

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 🔒 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.

See also  CPI DATA GIVES AMMUNITION TO BOTH BULLS AND BEARS

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 $1827, silver futures are at $24.19, and oil futures are at $77.96.

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

DJIA futures are up 299 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.

 

BANK OF JAPAN SHOCKS MARKETS ACROSS THE GLOBE WITH MAJOR CONSEQUENCES

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

Bank Of Japan Shocks The Globe

Please click here for a chart of Japanese yen futures (JPY_F).

Note the following:

  • Historically, Bank of Japan (BoJ) is known for surprises.  Overnight, BoJ shocked markets across the globe.
  • The chart shows the big move up in Japanese yen on the jolt from BoJ.
  • BoJ is abandoning its present yield curve control after burning through billions of dollars.  BoJ is changing the cap for the 10-year government bond interest rate to 0.5% from 0.25%.  The rate jumped to 0.4%
  • Large investors have been borrowing in yen at the cheap rate and investing elsewhere such as in the U.S.  Now such investors have a double problem:
    • They may have to pay a higher interest rate.
    • Japanese yen is going higher.
  • In theory, the impact of the move by BoJ is lower asset prices and higher inflation across the globe.  
  • Nikkei 225, the popular index of Japanese stocks, fell 2.46%.
  • Yen moved about 3% against the dollar.  This is a very large move for a currency.
  • Stock markets across Asia fell.
  • Yields in the U.S. rose.
  • In the U.S. stock futures first fell, and then the momo crowd aggressively bought the dip.  Clearly, the momo crowd has no comprehension of the earthquake that just occurred.
  • The chart shows that the yen was stable against the dollar in the early part of the year.
  • The chart shows a downward sloping trendline that was in place as the Fed was raising interest rates.
  • The chart shows a consistent rise in the yen lately.
  • The U.S. stock market did not need another headwind, but it has come now from BoJ.
See also  SMART MONEY SELLS ON MOMO CROWD MISINTERPRETING RETAIL SALES AND PPI DATA

Housing Starts

Housing starts came at 1.427M vs. 1.395M consensus.

Building permits are a leading indicator.  Building permits came at 1.342M vs. 1.480M consensus. This indicates that there is more weakness to come in housing construction.

Momo Crowd And Smart Money In Stocks

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

Gold

Gold rallied on BoJ action.

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 🔒 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 $1814, silver futures are at $23.99, and oil futures are at $75.94.

S&P 500 futures resistance levels are 3860, 3950, and 4000: support levels are 3770, 3600, and 3520.

DJIA futures are down 12 points.

 

WATCH SEMICONDUCTORS FOR AN EARLY INDICATION – OPTION EXPIRATION, CHINA COVID AND POSITIVE SEASONALITY

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

Watch Semiconductors

Please click here for a chart of semiconductor ETF SMH.

Note the following:

  • Watch semiconductors as an early indication of a potential market move.
  • The chart shows that semiconductors have pulled back to the top of the support zone.
  • Technically, the support zone shown on the chart is a good place for semiconductors to bounce.  If semiconductors bounce, the market is likely to follow.  On the other hand, if semiconductors break the support zone, it will likely be an early indication of a market downturn
  • The RSI on the chart shows that semiconductors can go either way.
  • There are four crosscurrents.
    • Officially, China is reporting only two new Covid deaths. However, there are unofficial reports from crematoriums of a very large number of deaths.  This is causing uncertainty in China’s opening. Remember China has 1.4 billion people.  There are reports that hospitals are being ordered to report the cause of death based on underlying conditions and not on Covid when a Covid positive person dies.
    • Last week was a $4 trillion options expiration.  Options expiration was to the downside.  Typically, when a large option expiration is to the downside, the market moves up on Monday and Tuesday following provided there are no other crosscurrents.
    • The seasonality is positive.
    • The Arora Report has been sharing with you our analysis for a long time that Wall Street’s estimates for 2023 are too high. Now more and more strategists are coming around to this view.
See also  WEEKLY STOCK MARKET DIGEST: FED’S FAVORITE INFLATION GAUGE RISES THE LEAST SINCE 2021, ALLIANCE AGAINST CHINA

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 🔒.  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 $1801, silver futures are at $23.43, and oil futures are at $75.53.

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

DJIA futures are down 16 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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