WEEKLY STOCK MARKET DIGEST: THE RETURN OF ‘STONKS ALWAYS GO UP’

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.’

THE RETURN OF ‘STONKS ALWAYS GO UP’

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

Stonks Always Go Up

Please click here for a chart of ETF ().

Note the following:

  • In older days, ‘stonks’ meant ‘a concentrated artillery bombardment.’  The meme crowd started using the word stonks to describe the stocks they were hoping to push to the moon.  The momo crowd adopted the mindset that ‘stonks always go up.’  The positive sentiment among the momo and meme crowds is returning with a vengeance – stonks always go up mindset has returned.
  • In theory,  ETF  is a proxy for disruptive innovations.
  • In practice at this time, ARKK has become a proxy for speculative momo stocks.  This is the result of how the ETF is managed. For example, during this downturn,  ARKK sold Apple stock to defend its speculative positions from falling.
  • The chart shows Arora sell signal for momo stocks.  ARKK hit a new high two days later and then lost 39% of its value in a short time as shown on the chart.
  • The chart shows that ARKK has traced a higher low. This is positive in the very short term.

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 🔒.

Gold

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

For longer-term, please see gold and silver ratings.

Oil

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

For longer-term, please see oil ratings.

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 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 $1889, silver futures are at $28.12, and oil futures are $63.12.

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

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, on dips, consider holding 🔒 in cash or treasury bills or short-term bond funds 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, 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.

A CHANGE ON MORATORIUM IN STARTING NEW POSITIONS

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

A Change In Moratorium

Please click here for a chart of    Nasdaq 100 ETF ().

Note the following:

  • Please start out by reading yesterday’s Afternoon Capsule.
  • The tech stocks should have gone down on a hint in FOMC minutes that some Fed members want to start ‘thinking about thinking’ over the next few meetings about tapering money printing.
  • Instead of going down, tech stocks rallied.
  • This morning, significant selling came into futures after 4:00 am.  Again the momo crowd aggressively bought the dip.
  • The pattern shown on the chart is that of a market with a fair probability of getting ready to form a setup for a bounce.
  • When an oversold market bounces on bad news, it typically means that those who were going to sell in the very, very short term have already sold and the slightest bit of buying can cause a bounce.
  • When we look at the comprehensive ZYX Asset Allocation Model with inputs in 10 categories, it is still suggesting that the probability adjusted risk reward is not favorable for the medium term.
  • The sum total of the foregoing is that there is a tension between the technicals and a significantly more comprehensive model.
  • An appropriate resolution to the tension is to lift the moratorium on starting new positions or adding to existing positions for aggressive investors but keep the moratorium in place for conservative investors.  At this time, for growth investors who fall between conservative investors and aggressive investors, the call is to be highly selective when buying.
  • We will shortly publish lists of positions that are in buy zones.
  • From a seasonality perspective, the market could be getting ready for a Memorial Day rally followed by a summer rally.  After the summer rally, there may be a significant dip going into fall.  However, keep in mind that seasonality does not always work.
  • Also, keep in mind that the buy zones will see revisions as more data comes in.

Jobless Claims

Initial Jobless Claims came at 444K vs. 460K consensus. This is a leading indicator and carries heavy weight in our models.

This is a new pandemic low.

Bitcoin

Bitcoin is holding its rally.  Yesterday bitcoin fell below $30,000 and then bounced to $40,000.  It is at $41,907 as of this writing.  The big dip yesterday morning appears to be related to forced selling from margin calls.

Momo Crowd And Smart Money In Stocks

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

Gold

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

For longer-term, please see gold and silver ratings.

Oil

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

For longer-term, please see oil ratings.

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 $1869, silver futures are at $27.87, and oil futures are $63.12.

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

DJIA futures are down 43 points.

SMART MONEY SELLS BUT MOMO BUYS ON ‘NOT EVEN THINKING ABOUT THINKING ABOUT’

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

Not Even Thinking About Thinking About

Please click here for a chart of   Nasdaq 100 ETF ().

Note the following:

  • The Federal Open Market Committee (FOMC) minutes will be released at 2:00 pm ET today.
  • This important event is bringing into focus Powell’s statement, “We are not even thinking about thinking about raising rates.”
  • The Fed has been stubborn to stick with the policies formed before the following:
    • Development of the vaccine.
    • Blue sweep.
    • Biden borrowing heavily and sending free money to people who did not need it.
    • The success of the vaccine.
    • Economy opening up.
    • Strong economic data.
  • Smart money is concerned that the Fed’s intransigence may prove to be a blunder and as a precautionary measure selling stocks. It is important to note that smart money, so far, is not exiting the stock market, they are simply trimming positions.
  • In contrast with the smart money, the momo crowd is thrilled about $120 billion of money printing every month, near-zero interest rates and heavy borrowing.  Nobody can blame the momo crowd for aggressively buying the dip – there are no signs of the Fed or Biden responding to the new data – they are stuck.
  • The chart shows that the market is now below the line marked support/resistance but still above the line marked support. Investors should consider the space between the two lines as a battle zone.
  • It is important for investors to stay neutral so that they can objectively observe the new data.
  • There is no way to know who will win this battle.
    • On the side of the momo crowd is tremendous liquidity in the system.  A large part of the money that is being created and borrowed has gone into the stock market and real estate.
    • On the bear’s side, there is a powerful argument that the stock market rally from pandemic lows is an artificial construct and cannot be sustained forever.
  • The chart shows that the Arora signals to sell momo stocks, to take partial profits, and to not add to or initiate new long term positions have been spot on.
  • RSI shown on the chart has turned down and is now back at the oversold level.  Investors need to remember that oversold markets tend to bounce.

Crypto Tumble

In yesterday’s Afternoon Capsule, we shared with you Chinese regulators restating restrictions on financial institutions related to cryptocurrencies.  At that time, not many were paying attention to the report from China.  Now the report from China is getting coverage by the media and retail investors are getting scared and aggressively selling cryptos.  Some retail investors are misunderstanding in thinking that  China is banning cryptos – this is not the case and untrue.

Momo Crowd And Smart Money In Stocks

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

Gold

Money is flowing out of cryptos and into gold.

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

For longer-term, please see gold and silver ratings.

Oil

API data showed a build in crude of 620K barrels vs. consensus of a build of 1.68M barrels.  This data is bullish.

There is concern developing that Biden will allow Iranian oil to come into the market.  Such a development will be highly bearish.

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

For longer-term, please see oil ratings.

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 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 $1871, silver futures are at $27.80, and oil futures are $63.66.

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

DJIA futures are down 324 points.

AVOID THE MOST COMMON INVESTOR TRAP

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

Avoid The Most Common Trap

Please click here for a chart of  S&P 500 ETF ()  which represents the benchmark for the stock market index ().

Note the following:

  • Right now there is a moratorium on starting new long term positions with the exception of  and  for most investors.  The exception is super aggressive investors.
  • The purpose of this Morning Capsule is to help investors understand the moratorium and avoid the most common trap that may lie ahead.
  • The chart illustrates the point by comparing  with Taiwan ETF ().
  • The chart shows that the Taiwan stock market went up over 74% before falling compared to S&P 500, which went up 42% before falling. This is a substantial outperformance by Taiwan.
  • The chart shows Arora buy signal on Taiwan in ZYX Emerging.
  • The chart shows Arora sell signal on Taiwan.  The trade resulted in great profits.
  • The chart shows about 30% drop in the Taiwan stock market.  Note that the drop happened quickly.
  • Why did a 30% drop occur so quickly? The reason is the spread of COVID.  To most investors this may seem odd – most investors have learned that after the initial drop in March 2020, the stock market went up as COVID spread.
  • Not many investors would believe that in Taiwan at this time market dropped 30% because of COVID.  The reason Taiwan dropped so quickly and so aggressively is that nobody believed that the market would drop on COVID.  It is the reverse of what was happening in March 2020 when not many investors believed that the stock market would make new highs because of COVID.
  • The most common trap is ‘recency bias.’  Recency bias is investors believing what has happened in the recent past will continue to happen.  Right now most investors are very sure that every slight dip in the stock market should be bought for the long term.  Unless you are ready to handle a big dip, it is better to be careful right now because probability-adjusted risk reward ratio is not favorable.

Momo Crowd And Smart Money In Stocks

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

Gold

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

For longer-term, please see gold and silver ratings.

Oil

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

For longer-term, please see oil ratings.

Markets

Our very, very short-term early stock market indicator is 🔒.  The indicator is at a point where it can swing easily 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 $1868, silver futures are at $28.50, and oil futures are $6617.

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

DJIA futures are up 15 points.

‘IN FED WE TRUST’ BUYING FROM OVERSOLD CONDITION EASES, MUSK BITCOIN TUSSLE

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

In Fed We Trust

Please click here for a chart of    Nasdaq 100 ETF ().

Note the following:

  • The chart shows that RSI had become very oversold.
  • As we have been stating, when a market becomes oversold, it tends to bounce.
  • The chart shows that momo buying has caused the market to bounce.
  • The chart shows that during the decline, the market did not even touch the support line.  This is a positive.
  • The chart shows that the market closed above the support/resistance line. If this had not occurred on a Friday, this would have been considered positive.  The bounce on Friday was, in part, a short squeeze.
  • The chart shows that this morning the buying has eased causing the market to pull back to the support/resistance line.
  • From a macro perspective, the market participants can now be divided into three camps.
    • ‘In the Fed we trust’ crowd. This crowd is mostly made up of the momo crowd. This crowd believes the Fed in that inflation will be transitory and $120 billion a month of money printing is a ‘free lunch.’
    • The second camp is of a small minority that believes the Fed is wrong.  At a time when the housing market is red hot and mortgage rates are low, how does it make sense for the Fed to print money to buy mortgage securities hand over fist to cause the house prices to go even higher?
    • The third camp mostly consists of smart money, is not taking a definitive stand but is highly skeptical of the Fed’s position.

Bitcoin

Over the weekend, Elon Musk drove bitcoin lower with his tweets.  There was concern that Tesla () was either planning to or might sell its stash of bitcoin.  As of this writing, bitcoin is stabilizing on the belief that  has not sold bitcoin.

Momo Crowd And Smart Money In Stocks

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

Gold

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

For longer-term, please see gold and silver ratings.

Oil

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

For longer-term, please see oil ratings.

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 $1846, silver futures are at $27.60, and oil futures are $64.91.

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

DJIA futures are down 113 points.

Markets can generate substantial wealth for knowledgeable investors. NOW YOU TOO CAN ALSO SPECTACULARLY SUCCEED AT MEETING YOUR GOALS WITH THE HELP OF THE ARORA REPORT. You are receiving less than 2% of the content from our paid services. …TO RECEIVE REMAINING 98% INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES,
TAKE A FREE TRIAL TO PAID SERVICES.

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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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