WEEKLY MARKET DIGEST: A BREAK ABOVE THE UPPER BAND, RECORD COMPLACENCY AMONG TRADERS $DIA $GLD $QQQ $SLV $SPY $TBT $USO

WEEKLY MARKET DIGEST: A BREAK ABOVE THE UPPER BAND, RECORD COMPLACENCY AMONG TRADERS $DIA $GLD $QQQ $SLV $SPY $TBT $USO

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 What To Do Now.

OPTION TRADERS SHOWING RECORD COMPLACENCY, STRONG HOUSING STARTS

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

Record Complacency

Option traders tend to be the most aggressive ones.; they buy calls when they are bullish and the buy puts when they are bearish.  Put/call ratio is one of the components of our sentiment indicator.  The data is showing record complacency among option traders in that they are aggressively betting on the market to go higher without any fear of the market going down.

Historically, when option traders become complacent it is a selling opportunity and not a buying opportunity.  Of course every time option traders become complacent, their answer to the historical data is that this time is different.  In our analysis, investors should not ignore history.

Housing Starts

Housing Starts came at 1.186M vs. 1.180M consensus.  There is only one way to describe it — the housing market is hot.  30-year mortgage rates have fallen below 3%.

Hosing Permits came at 1.241M vs. 1.29M consensus.  Permits are a leading indicator.

Momo Crowd And Smart Money In Stocks

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

Gold

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

For longer term, please see gold and silver ratings.

Oil

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

For longer term, please see oil ratings.

Marijuana

The momo crowd is buying marijuana stocks in the early trade.  Smart money is inactive.

Technical Patterns

None of note.

This is powerful information and many investors use this to enter trades in addition to our official signals.  Here are the three most common uses: 1) Short-term trades in ETFs  2) Decisions to trim or add to long-term positions, and 3) New option trades. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators.  To learn more please click here.

Markets

Our very, very short-term early stock market indicator is neutral but can easily swing in either direction. It is a summer Friday with low liquidity, it is easy to push the market around in either direction.  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.

Gold futures are at $1808, silver futures are at $19.60, and oil futures are $40.97.

S&P 500 futures resistance levels are 3228, 3278 and 3320: support levels are 3182, 3155 and 3124.

DJIA futures are up 140 points.

GOOD ECONOMIC DATA — STRONG RETAIL SALES IN THE U. S. AND STRONG GDP IN CHINA

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

ECB

European Central Bank (ECB) leaves rates and bond buying program unchanged.  This is as expected.

Retail Sales

Retail Sales Ex-auto came at 7.3% vs. 5.0% consensus.  We leave auto out because auto data is very noisy and hinders projections.  This data is positive.  In our analysis the data is strong due to pent up demand.  The real test will come when the pent up  demand is satisfied.

If the government does not engage in more borrowing, paying people an extra $600 a week on top of regular unemployment to not work and does not come up with a replacement program for PPP, expect retail sales to fall.

Investors should keep it front and center that during the pandemic, the income of Americans has gone up due to government programs and that is reflected in the rise of the stock market.

Jobless Claims

Initial Jobless Claims came at 1.30M vs. 1.26M consensus.  This data says that the job picture may get worse as there are more shutdowns due to the coronavirus spread.

China GDP

China GDP came at 3.2% vs. 2.5% consensus.  This is very strong data. However in our analysis, data coming out of China should not be fully trusted.

Momo Crowd And Smart Money In Stocks

The momo crowd is buying stocks in the early trade. Smart money is lightly selling stocks.

Gold

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

For longer term, please see gold and silver ratings.

Oil

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

For longer term, please see oil ratings.

Marijuana

The momo crowd is buying marijuana stocks in the early trade. Smart money is inactive.

Technical Patterns

None of note.

This is powerful information and many investors use this to enter trades in addition to our official signals.  Here are the three most common uses: 1) Short-term trades in ETFs  2) Decisions to trim or add to long-term positions, and 3) New option trades. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators.  To learn more please click here.

Markets

Our very, very short-term early stock market indicator is negative.  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 slightly stronger.

Gold futures are at $1806, silver futures are at $19.66, and oil futures are $40.77.

S&P 500 futures resistance levels are 3228, 3278 and 3320: support levels are 3182, 3155 and 3124.

DJIA futures are down 183 points.

BREAK ABOVE THE UPPER BAND ON VACCINE OPTIMISM

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

Vaccine Optimism

MRNA released data from its Phase 1 trial. The data was impressive. All 45 participants developed neutralizing antibodies. There are still many unknowns but this market has rose colored glasses on — it focuses only on the positives and ignores the negatives. Stock futures immediately jumped 250 DJIA points on the news.

This morning there is a report that AZN will be shortly reporting positive results from Oxford University vaccine.  The stock futures have continued to rocket and are up 497 DJIA points as of this writing.

Break Above The Upper Band

Please click here for an annotated chart of DIA.

Note the following:

  • The market has broken above the upper band of the support/resistance zone.
  • The chart shows that RSI has turned positive.
  • The next target is the high from June or the prior bar shown on the chart.
  • If the June high is broken, February high will act as a magnet for the traders.

Earnings

So far earnings are mixed. However the market is in the mode of ignoring the bad aspects of earnings and running up the stocks anyways.

Industrial Production

Industrial production came at 5.4% vs. 4.6% consensus. This is another indication of the economy becoming stronger.

Momo Crowd And Smart Money In Stocks

The momo crowd is extremely aggressively buying stocks.  Smart money is inactive.

Gold

The momo crowd is selling gold but buying silver in the early trade.  Smart money is inactive.

For longer term, please see gold and silver ratings.

Oil

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

For longer term, please see oil ratings.

Marijuana

The momo crowd is buying marijuana stocks in the early trade.  Smart money is inactive.

Technical Patterns

None of note.

This is powerful information and many investors use this to enter trades in addition to our official signals.  Here are the three most common uses: 1) Short-term trades in ETFs  2) Decisions to trim or add to long-term positions, and 3) New option trades. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators.  To learn more please click here.

Markets

Our very, very short-term early stock market indicator is positive.  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.

Gold futures are at $1809, silver futures are at $19.68, and oil futures are $40.35.

S&P 500 futures resistance levels are 3228, 3278 and 3320: support levels are 3182, 3155 and 3124.

DJIA futures are up 497 points.

A BEARISH PATTERN IN THE STOCK MARKET — THIS ALSO HAPPENED BEFORE THE LAST BIG TECH CRASH

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

Inflation

Core CPI came at 0.2% vs. 0.1% consensus. This number is hotter and caused smart money to sell while the momo crowd was buying on the number in the premarket.

Reversal Pattern

The stock market has traced a negative reversal pattern that reminds me of March 2000. In the year 2000, tech stocks crashed; the momo (momentum) crowd with portfolios primarily consisting of popular momentum stocks at that time ultimately lost over 90% of their value. This time is different in the stock market in some ways but similar to 1999 period in other ways. Nonetheless, prudent investors should pay attention. Let’s examine with the help of a chart.

The Chart

Please click here for an annotated chart of Nasdaq 100 ETF (QQQ) which represents the popular stock market index Nasdaq 100 (NDX).

Note the following:

  • The chart shows a reversal day. Nasdaq opened significantly higher than the prior day but closed lower than the prior day.
  • Reversal in stock market’s momo crowds’ favorite stocks was striking in its magnitude that is not reflected in the stock market indices. Investors should take a look at intraday charts of these six stocks: Tesla (TSLA), Fastly (FSLY), Peloton (PTON), Square (SQ), Zoom Video (ZM) and DocuSign (DOCU).
  • The six stocks mentioned above are prime examples of many popular stocks of the day that have nothing but air under them from a technical perspective. This is the reason that they experienced huge drops on the reversal. If you think these six charts look bad, you have seen nothing yet. Consider going back and viewing charts of popular tech stocks in the 1999-2000 time periods.
  • The stocks mentioned above have a great story line that has captured the imagination of investors. However their valuations are unsustainable with the possible exceptions of Tesla and Square.
  • The chart shows a trendline that has been in place since March in the stock market.
  • The chart shows that the trendline is intact. Investors should carefully watch for break or continuation of this trendline.
  • On the positive side, the pattern was less pronounced in Dow Jones Industrial Average (DJIA) and S&P 500 (SPX). This is similar to the early year 2000
  • Also encouraging for the bulls was that the five large-cap tech stocks of Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG) (GOOGL) and Facebook (FB) held up well. This is similar to the pattern in early 2000.

What Does It All Mean?

This stock market is controlled by the momo crowd. The momo crowd has been buying stocks not because of a great economy or great earnings but because the momentum is up. History tells us that the momo crowd does not give up the ghost easily. They will persist in the same behavior until their losses are high enough for them to cry ‘uncle’.  At this time the momo crowd has gains. The momo crowd is buying every dip.

The momo crowds’ behavior coupled with a potential short squeeze can easily take this stock market to new highs.  The stock market bubble can get bigger.

Prudent investors should consider being positioned for new stock market highs but at the same time protecting themselves.

Momo Crowd And Smart Money In Stocks

The momo crowd is acting like a yo-yo in the early trade.  Smart money is selling.

Gold

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

For longer term, please see gold and silver ratings.

Oil

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

For longer term, please see oil ratings.

Marijuana

The momo crowd is buying marijuana stocks in the early trade.  Smart money is inactive.

Technical Patterns

Nasdaq has traced an outside day. This is bearish.  ETFs of interest are  and .

This is powerful information and many investors use this to enter trades in addition to our official signals.  Here are the three most common uses: 1) Short-term trades in ETFs  2) Decisions to trim or add to long-term positions, and 3) New option trades. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators.  To learn more please click here.

Markets

Our very, very short-term early stock market indicator is negative.  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  range bound.

Gold futures are at $1799, silver futures are at $19.41, and oil futures are $39.39.

S&P 500 futures resistance levels are 3155, 3182 and 3228: support levels are 3124, 3114 and 3075.

DJIA futures are up 6 points.

CHINESE STOCKS SURGE CREATING ROUND ROBIN BUYING, VACCINE GETS FAST TRACK

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

Chinese Stocks Surge

Shenzhen Component Index surged 3.496%. Shenzhen Component is somewhat similar to Nasdaq in the U. S.

Shanghai Composite was up 1.77%.

Record Foreign Flows In Chinese Bonds

Foreign investors are excited about buying Chinese government bonds denominated in yuan. Foreign money inflows into these bonds reached a record of $619 billion. The thesis is the same as we have discussed before — China is safer than the U. S. In our analysis, this thesis is flawed but investors disagree. They are pouring billions into China.

Round Robin Buying

Strength in China led to buying in the rest of Asia. From Asia, buying moved to Europe and then to the U. S.

Coronavirus Vaccine Fast Track

FDA has put two vaccine candidates from PFE for coronavirus on fast track. This is adding fuel to the fire of buying in overheated stocks.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying stocks in the early trade.  Smart money is inactive.

Gold

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

For longer term, please see gold and silver ratings.

Oil

OPEC is contemplating tapering production cuts.  In a normal market this would have caused oil to fall.   But this market is different in that the momo crowd is excited and throwing money at everything including oil.

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

For longer term, please see oil ratings.

Marijuana

The momo crowd is buying marijuana stocks in the early trade.  Smart money is inactive.

Technical Patterns

None of note.

This is powerful information and many investors use this to enter trades in addition to our official signals.  Here are the three most common uses: 1) Short-term trades in ETFs  2) Decisions to trim or add to long-term positions, and 3) New option trades. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators.  To learn more please click here.

Markets

Our very, very short-term early stock market indicator is positive but can quickly turn negative.  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.

Gold futures are at $1812, silver futures are at $19.51, and oil futures are $40.20.

S&P 500 futures resistance levels are 3228, 3278 and 3320: support levels are 3182, 3155 and 3124

DJIA futures are up 187 points.

WHAT TO DO NOW

Looking ahead and not only in the rear view mirror, consider continuing to hold existing core portfolio positions.  Based on individual risk preference, consider holding cash or treasury bills 29% – 37% and short to medium-term hedges of  3% – 8% and short term hedges of 3% – 10%.

 

A knowledgeable investor would have turned $100,000 into over $1,000,000 with the help from The Arora Report. 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.

Please click here to take advantage of a FREE  30 day trial.

Check out our enviable performance in both bull and bear markets.

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