This post was published yesterday in The Arora Report paid services .
To gain an edge, this is what you need to know now.
Solving SoftBank Mystery
It would be nice if SoftBank (SFTBY) told us if they were done selling. Of course they are never going to tell us. However, the mystery is easily solved by looking at two charts.
Please click here for a chart of (QQQ).
Please click here for a chart of (SPY).
Note the following:
- VUD indicator is the most sensitive measure of net supply/demand in real time.
- The green on the charts shows net demand, orange shows net supply.
- One difference between SPY and QQQ is that QQQ has significantly higher weight of the momo stocks.
- Note that in the big picture, the price action in both SPY and QQQ is similar.
- Note that in sharp contrast to the price action, the VUD indicator is painting very different pictures for SPY and QQQ.
- The chart shows that the VUD indicator for SPY is mostly orange.
- The chart shows that for QQQ the VUD indicator is mostly green.
Here are the two conclusions:
- The combined pattern between the two charts shows that the persistence of green VUD indicator in QQQ is the result of one or more whales attempting to prop up some of the momo stocks.
- The pattern shows that this is not the work of retail traders.
Margin Selling
- The first chart shows momo buying early in the morning and then forced margin selling taking place.
- The first chart shows margin forced selling again coming in the afternoon.
- Typically three days of margin selling washes off the weak hands and then stocks temporarily rise.
Money Flows
The momo crowd money flows since the Morning Capsule are 🔒 (To see this data, please take a 30 day free trial). It appears that one or more large momo players are trying to selectively prop up the stocks they are in.
Smart money flows since the Morning Capsule are 🔒.
Short squeeze money flows are neutral.
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 positive.
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.
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
🔒
Close
There are appear to be sell 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.
The Afternoon Capsule is not published daily but only when conditions warrant it. The content below is unchanged and is to be used for reference as needed.
Sophistication
Many investors are spoiled due to the decade long bull market. Many believe it is very simple – be all in or be all out. Unfortunately, the last decade was an exception to the rule.
As the market is running up, investors who do not understand the true nature of the market are jumping in with both feet without appreciating the risks.
Risk and reward are two sides to the coin. It is important to consider both.
For your reference, we are pasting the following from your Getting A Running Start Guide,
Everything should be made as simple as possible but not simpler.
Albert Einstein
Strategic Vs. Tactical
All investors should consider bringing more sophistication to their investing and trading. It is important to clearly understand the difference between strategic and tactical calls. For your convenience, a prior post is pasted below.
ASK ARORA: CASH AND HEDGES: UNDERSTANDING THE DIFFERENCE BETWEEN STRATEGIC AND TACTICAL CALLS
Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.
We have written previously about the importance of understanding the difference between strategic calls and tactical calls.
We welcome your comments and questions. The law does not allow us to answer them individually. However, when a large number of subscribers ask similar questions, a post is done. Typically starting with Ask Arora.
Based on the questions received this morning, a refresher on understanding the difference between strategy and tactics is in order.
Strategy
Strategy defines medium to long term plan to achieve the highest risk adjusted returns.
Tactics
Tactics are small adjustments within the strategy to further enhance risk adjusted returns.
If You Could Pick Only One
We recognize that all investors have individual preferences. If you could pick only one, consider focusing on the strategy. Never focus only on tactics at the expense of strategy.
Strategic Call
The strategic call at this time is to stay cautiously bullish. The logic is very straightforward. Consider the following key points:
- The stock market has been going straight up for 10 years. It is late cycle. Portfolios have to be organized for the late cycle. Risks are much higher in the late cycle compared to when a bull market is in an early stage.
- The world is awash in debt. The sovereign debt owed by governments and corporate debt owed by zombie corporations has dramatically increased. It is a bubble that is getting bigger waiting for a pin to prick it.
- Valuations are expensive.
- A big reason for levitation of the stock market is money printing by the central banks. This can continue for a long time but not forever.
Tactical Calls
Tactical calls are simply short term adjustments. For example, a tactical call to decrease cash and hedges is based on the following:
- Weak hands temporarily washed out overbought condition.
- Overbought condition temporarily relieved.
- Sentiment backing off from almost extreme bullish levels.
- Overall better earnings.
Cash And Hedges
We provide a range for cash and hedges. Most investors would be in the middle of the ranges. As such, they would not need to make any change. When a change is given only at the edges of the ranges, only the most active investors need to make a change.
Arora’s 12th Law
Arora’s 12th Law is applicable here: To be successful at investing and trading, flow with the new data and stay nimble.
Bullet Proof Your Portfolio And Increase Your Returns
We consistently see that private investors, money managers and investment advisors who have attended the Bullet Proof Your Portfolio and Increase Your Returns seminar do significantly better compared to those who have not attended the seminar.
Here are the four main reasons why this consistently happens to investors who attend the seminar:
- They start understanding the true nature of the markets.
- Develop a better framework to handle the true nature of the market.
- Tend to act with more conviction and with more comfort.
- Tend to develop a better control over their emotions.
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