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.’
If you could watch only one indicator to know the future direction of the stock market at this time, will it be a big help to you in your investing?
Here is the answer with the most important chart right now.
THE MOST IMPORTANT KEY TO THE STOCK MARKET DIRECTION
To gain an edge, this is what you need to know today.
The Key
Please click here for a chart of 7-10 year Treasury bond ETF (IEF)
Note the following:
- The most important key to the future stock market direction is bonds
- Bonds move inverse to interest rates. In plain English, bonds go down when interest rates move higher and vise versa.
- The chart shows that bonds bounced off the support tracing a double bottom (some will call it a triple bottom).
- The chart shows that bonds are now at a resistance zone.
- The chart shows that previously a breakdown occurred from the present resistance zone. This breakdown was the real reason behind the pullback in Nasdaq, SPACs, and other momo stocks.
- The chart shows that bonds have now recovered all the way back to the breakdown point. This is the reason that Nasdaq has also recovered.
- SPACs and momo stocks have not recovered because they were speculative stocks and speculative stocks tend to lag.
- If the bonds break above the resistance zone, expect a rip-roaring rally especially in tech stocks.
- If bonds break the support shown on the chart, expect tech stocks to significantly pull back and also expect a blood bath in speculative momo stocks as well as SPACs.
- The foregoing is the most important key for the stock market direction. However, keep in mind that there are always many other factors and cross currents.
PPI
Producer Price Index (PPI) will be released at 8:30 am ET. The consensus for the headline is 0.5%.
The consensus for Core PPI is 0.2%.
If the numbers indicate any new adjustment to the portfolios, we will do separate posts.
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 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 $1748, silver futures are at $25.34, and oil futures are $59.61.
S&P 500 futures resistance levels are 4200, 4318 and 4400: support levels are 4000, 3950 and 3860.
DJIA futures are up 56 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.
THE FASTEST INCREASE IN INVESTOR BORROWING SINCE 2007
To gain an edge, this is what you need to know today.
Investor Borrowing
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- Investor borrowing hit a record $814 billion at the end of February.
- This is up 49% from a year ago.
- This is the fastest increase since 2007.
- Investors may recall that the stock market crashed in 2008.
- Prior to 2007, the last time margin debt grew fast was in 1999.
- The stock market crashed in 2000.
- 2021 is different from 200 and 2008 in that the Fed is printing money unlike those two times and the government is borrowing excessively unlike those two times. The borrowing and money printing significantly reduces the probability of a crash in the short term as the market is flooded with liquidity.
- The chart shows that there is strong buying in Nasdaq in the early trade.
- The chart shows that Nasdaq is now close to the prior high. The prior high is acting as a magnet for traders.
- RSI shows that Nasdaq is now very overbought and vulnerable.
- Investors should pay special attention to the volume. The chart shows that the volume during the rally is relatively low compared to the volume during the drop. This indicates a lack of conviction in the rally.
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🔒. 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 and bonds are range bound.
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 $1746, silver futures are at $25.44, and oil futures are $59.59.
S&P 500 futures resistance levels are 4200, 4318 and 4400: support levels are 4000, 3950 and 3860.
DJIA futures are down 25 points.
WAIT FOR THE FED MINUTES AS NASDAQ GETS OVERBOUGHT
To gain an edge, this is what you need to know today.
Wait For Fed Minutes
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The Fed minutes will be released at 2:00 pm ET.
- The Fed minutes may move interest rates and in turn the stock market, especially tech stocks.
- The Fed is likely to stay intransigent about money printing irrespective of the data but the minutes may give insight into the possibility of the Fed being forced to taper its money printing.
- The chart shows that Nasdaq is now overbought. Overbought markets tend to be vulnerable to pullbacks.
- The chart shows Nasdaq has decisively moved above the support line (prior resistance line) shown on the chart.
- The upmove has occurred because interest rates stopped going up.
- If interest rates go above 1.78% on 10-year Treasuries, it will be a negative for tech stocks.
- If interest rates go below 1.62% on 10-year Treasuries, it will be positive for tech stocks.
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 🔒. 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 $1736, silver futures are at $25.03, and oil futures are $59.76.
S&P 500 futures resistance levels are 4200, 4318 and 4400: support levels are 4000, 3950 and 3860.
DJIA futures are down 46 points.
A NEW ‘DOUBLE MUTANT’ VIRUS VARIANT NOW IN THE U. S.
To gain an edge, this is what you need to know today.
Double Mutant
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark for the stock market index (SPX).
Note the following:
- Standford Healthcare has identified seven possible cases around the San Francisco Bay area of a new ‘double mutant’ virus variant.
- The double mutant variant is spreading like wildfire in the state of Maharashtra in India. The state is reporting 50,000 new cases per day.
- In theory, the new double mutant variant is more lethal and more contagious. It also appears that vaccines are less effective.
- The mainstream media is not yet highlighting the story. For investors, the concern is that if this variant spreads, it may slow down the recovery.
- If the variant spreads, the momo crowd will likely buy the news because it will mean more money printing, more borrowing, and more free checks.
- Smart money will likely sell the news, especially since the market is very expensive.
- The chart shows there is a nice move up in RSI since yesterday. This is a positive.
- The chart shows that after the breakout, yesterday the market closed near its high. This is a positive.
- The chart shows that in the early trade there is a pause even though the momo crowd is buying aggressively.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 stocks in the early trade. Smart money is 🔒.
Gold
The momo crowd is 🔒. 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 $1737, silver futures are at $25.06, and oil futures are $59.76.
S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.
DJIA futures are down 67 points.
HIRING GOES GANGBUSTERS – STOCK MARKET BREAKS OUT
To gain an edge, this is what you need to know today.
Stock Market Breaks Out
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark for the stock market index (SPX).
Note the following:
- The chart shows that the stock market has broken out.
- The chart shows the breakout that occurred after the trend line held.
- RSI shown on the chart is slightly overbought but there is more room to run.
- There is enthusiasm after a strong jobs report on Friday.
- Investors ought to look at different time frames. Even though there is a breakout, in the very, very short term, the rally can stall and even a shallow pullback can occur.
- 4200 on S&P 500 is a new magnet for traders.
Hiring Goes Gangbusters
The U. S. added 916K nonfarm payrolls vs. a consensus of 627K.
Nonfarm payrolls expanded to 780K vs. 470K consensus.
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 and bonds are range bound.
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 $1724, silver futures are at $24.90, and oil futures are $59.88.
S&P 500 futures resistance levels are 4200, 4318 and 4400: support levels are 4000, 3950 and 3860.
DJIA futures are up 243 points.
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