NO 75 BPS HIKE AHEAD – STOCKS RALLY

By Nigam Arora & Dr. Natasha Arora

Editor’s Note: This post was made available to paying subscribers in real time yesterday when the Fed chair was just ending his press conference.  Since then, paying subscribers were provided with the Morning Capsule with the title “BE WARY OF CELEBRATING THE FED HIKE WITH THE MOMO CROWD AS HISTORY MAY REPEAT” and an Interim Capsule titled “SMART MONEY KEEPS ON SELLING.”  To get these capsules in real time, take a 30 day FREE trial.

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

No 75 BPS Hike

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 when the Fed statement was released.
  • The chart shows when Powell’s press conference began.
  • The most important news from the press conference is that Powell has ruled out a 75 basis point increase.
  • In response, stocks have aggressively rallied.
  • In the Morning Capsule we wrote,

The technical set up is for a 5% rally.

  • Now the S&P 500 has rallied 2.81% as of this writing.
  • The market has rallied over 5% from lows only two days ago.
  • Powell said that he admires Volcker.  Powell also said that Volcker had the courage to do the right thing.
    • Our inference is that Powell is leaning towards doing the right thing even if it means tightening the monetary policy to the point of a recession.
      • This is very encouraging for the prudent long term investors.
      • This should be discouraging for the momo crowd.
  • Powell said that it is very difficult to project even 90 days ahead and the plan is to stay nimble.
  • Powell said that he cannot predict the neutral funds rate, but his estimate is that it is 2 – 3%.
  • The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.
  • The VUD indicator is solid green since the Fed statement.  This indicates net demand.

Money Flows

The momo crowd money flows since the Morning Capsule are 🔒 (To see the locked content, please take a 30 day free trial).

Smart money flows since the Morning Capsule are 🔒.

Short squeeze money flows are 🔒.

A Special Note To New Subscribers

Note the smart money behavior.  Smart money tends to sell into strength on strong up days.

New subscribers should consider adopting smart money’s way of investing and trading.

Sentiment

Sentiment is 🔒.

Sentiment is a contrary indicator at extremes.  In plain English, this means that when sentiment becomes extremely positive it is time to sell and when sentiment becomes extremely negative it is time to buy.

Close

There appear to be buy on close orders.

There is merit to watching the pattern of market on close orders as they represent the day’s dominant net cumulative activity by many professionals and funds.

Gold

The momo crowd money flows in gold are 🔒 since the Morning Capsule.

Smart money flows are 🔒 in gold since the Morning Capsule.

Oil

The momo crowd money flows in oil are 🔒 since the Morning Capsule.

Smart money flows in oil are 🔒 since the Morning Capsule.

Buy Zones And Buy Now Ratings

🔒

Nibbling

🔒

This post was published yesterday in The Arora Report paid services.  Since then the Morning Capsule has had an update in the 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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