WEEKLY MARKET DIGEST: A SHORT SQUEEZE DEVELOPS IN THE STOCK MARKET, MOMO SELLS GOLD AND OIL $DIA $GLD $QQQ $SLV $SPY $TBT $USO

WEEKLY MARKET DIGEST: A SHORT SQUEEZE DEVELOPS IN THE STOCK MARKET, MOMO SELLS GOLD AND OIL $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.

FEWER JOBS THAN CONSENSUS, MORE EVIDENCE OF THE HARM BEING DONE BY THE FED

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

Jobs Report

December Non-farm Private Payrolls came at 139K vs. 157K consensus.  The stock market likes the weaker data because it means the Fed may stay more accommodative for longer.

Long Term Harm

Investors are benefiting from the Fed’s policies. The latest leg of the stock market rise is in large part attributable to the Fed creating more money out of thin air in the last quarter.

Average hourly earnings rose 0.1% vs. 0.3% consensus.  This indicates that as investors continue to make money because of Fed policies, wages for an average person are getting stalled.  In the long term, this is not good for investors as disparity between the investor class and the working class rises.  This is the reason for popularity of Bernie Sanders and Elizabeth Warren.  Sooner or later, the Fed’s policies will end up harming investors.

Investors need to stay alert so that the significant gains in portfolios over the last decade are not lost.

Trade Deal

Investors are excited about signing of the trade deal next week.

Wall Street

Wall Street analysts are tripping over themselves to become more bullish than the next guy.  The sad reality is that the way Wall Street works, many analysts have simply become part of the momo crowd.  They see stock prices going up, they have no choice but to raise their targets.  So they find justifications for raising their targets.

Momo Crowd And Smart Money In Stocks

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

Gold

The momo crowd is lightly selling gold.  Smart money is inactive.

For longer term, please see gold and silver ratings.

Oil

The momo crowd is selling oil.  Smart money is inactive.

For longer term, please see oil ratings.

Marijuana

An analyst has set the target for ACB at $1.  ACB is trading at $1.73 as of this writing.  Of note is that the momo crowd has been the most bullish on ACB for the last two years compared to other large marijuana stocks.

The momo crowd is selling marijuana stocks.  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 but expect the market to open higher.  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

Gold futures are at $1576, silver futures are at $18.04, and oil futures are $59.53.

S&P 500 resistance levels are  3288, 3300 and 3360; support levels are 3256, 3223 and 3200.

DJIA futures are up 29 points.

A SHORT SQUEEZE DEVELOPS IN THE STOCK MARKET, MOMO SELLS GOLD AND OIL

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

Short Squeeze

A short squeeze that developed in the market late yesterday afternoon continues in the early trade.  In a short squeeze, short sellers feel compelled to buy to cover their positions exaggerating the move to the upside.  As momentum picks up to the upside because of a short squeeze, the momo crowd jumps on board even more aggressively without understanding the real reason for the move up.  Please see the chart below.

The Chart

Please click here  for an annotated chart of S&P 500 ETF (SPY).

Note the following:

  • The chart shows that Trump’s comment about Iran ‘standing down’ caused a big rally.
  • VUD indicator is the most sensitive measure of net supply and demand in real time.
  • VUD indicator shows that after the initial push up, supply of stocks exceeded demand.
  • The market continued to levitate in spite of supply exceeding demand because buyers were much more aggressive than sellers.
  • When the market did not go down, short sellers were compelled to cover giving the market another push in the late afternoon.

Initial Claims

Initial Jobless Claims came at 214K vs. 225K consensus.

Momo Crowd And Smart Money In Stocks

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

Gold

The momo crowd is aggressively selling gold as the momentum has reversed.  Smart money is inactive.

For longer term, please see gold and silver ratings.

Oil

The momo crowd is aggressively selling oil as the momentum has reversed.  Smart money is inactive.

For longer term, please see oil ratings.

Marijuana

There is no discernable momo crowd or smart money activity in marijuana.

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.  However the market is very overbought and can quickly swing to the downside.  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 slightly stronger.

Gold futures are at $1553, silver futures are at $17.93, and oil futures are $59.67.

S&P 500 resistance levels are  3288 and 3300; support levels are 3256, 3223 and 3200.

DJIA futures are up 104 points.

IRAN RETALIATES, A BIG ROUND TRIP IN THE MARKETS

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

Iran Retaliates

President Trump acted where his predecessors President Obama and President Bush apparently punted — assassination of Iranian Gen. Qassem Soleimani.  Apparently Obama and Bush punted because they felt that such a move would have led to serious consequences including a potential war with Iran. Only time will tell if Trump is right.

Right after Soleimani was killed and the stock market was falling, I wrote in the Morning Capsule that is provided to our subscribers before the market open that Soleimiani’s death may not be as significant for the stock market as it seems. Now Iran has retaliated with missiles on bases in Iraq where American soldiers are stationed. Let’s figure out what is next for investors in the stock market with the help of three charts.

The charts

Please click here for an annotated chart of oil futures (CLG20). I have not used the chart of popular oil ETF (USO) because it does not trade around the clock.

Please click here for an annotated 25-year chart of S&P 500 ETF (SPY), which tracks the benchmark S&P 500 Index (SPX).

Please click here for an annotated chart of Apple (AAPL) stock.

For the sake of complete transparency, the second and third chart have been previously published and not changes have been made.

Note the following:

  • Since most investors watch Dow Jones Industrial Average (DJIA), it is worth noting that so far there has not been a significant move in Dow Jones Industrial Average in percentage terms.
  • The first chart shows a big spike in oil when the news of retaliation by Iran hit.
  • The first chart shows the volatility in oil near the highs when smart investors started to speculate that Iran did not want war as the retaliation was very measured.
  • The chart shows oil falling as late comers figured out that Iran did not want war.
  • The chart shows that oil took another leg down when there was no immediate U. S. retaliation.
  • The first chart shows that oil broke support on speculation that Trump will let this pass and deescalate. In plain English, oil is lower as of this writing compared to where it was before Iranian retaliation.
  • The probability is very high that Trump may choose to deescalate but investors should not be complacent because Trump is unpredictable.
  • The probability is very high that Iran will continue to deescalate but investors should not be complacent because Iranians are very intelligent and clever; more attacks may come in different forms.
  • The second chart is a 25 year chart of the stock market, it is important to see how far the stock market has come. It is simply common sense to stay bullish but have defensive measures in place to protect portfolios. At The Arora Report we provide precise cash levels and hedges to hold in addition to the positions to hold and buy.
  • Of importance on the second chart of the stock market is RSI divergence. In plain English, it means that as the stock market has reached new highs, it is losing its internal momentum.
  • Loss of internal momentum is significantly more important than it seems on the surface because this market is controlled by the momo (momentum) crowd. The momo crowd keeps on buying not because valuations are low or because the macro picture is getting much better or earnings are rising fast, but because the stock market is going up. Most analysts would not dare to tell you this simple truth.
  • The third chart is that of Apple stock. The Apple stock chart is extremely important because Apple carries a very heavy weight in indexes and ETFs such as Nasdaq 100 ETF (QQQ).
  • Apple stock has shown an extraordinary rise.
  • Apple stock, in part, has been driven by the sentiment. It is true that Apple is successfully making a transition to services and this has led to a higher P/E.
  • Over five years ago, to the best of my knowledge, I was the first one to start projecting that Apple would get more into services and as a result get a higher P/E. Now that has happened. Even if oil prices go up, Apple is not going to stop its move into services. However the shift in sentiment could drive the stock lower.
  • In addition to Apple stock, large-cap tech stocks such as Amazon (AMZN), Facebook (FB), Google (GOOG) (GOOGL) and Microsoft (MSFT) have played a big part in the stock market rise. It is important for investors to keep an eye on price action in these four stocks.
  • The lifeblood of the modern economy is semiconductors more than oil. Among semiconductors, demand for DRAM and NAND memories are good indicators. Samsung (SSNLF) is a big supplier of memory. In just released earnings, Samsung is making positive comments about memory. For the U. S. investors, the two stocks that are easier to trade are Micron (MU) and Western Digital (WDC) to reflect demand for memory.
  • Investors should keep a close eye on the stock of AMD (AMD) as that has been the darling.
  • Investors should also keep an eye on short squeezes. Short squeezes create artificial demand but provide a good real time indication of sentiment that everyone can easily follow. Two short squeezes happen as of this writing that are of note are in Tesla (TSLA) stock and Apache (APA) stock.

The danger

As I have written before, the real danger to investors is not a war with Iran but the simple fact that this stock market is controlled by the momo (momentum) crowd. A big part of the buying has occurred just because the market is going up. The momo crowd is fickle and can easily start selling if the momentum reverses. For this high valuation, fundamental and macro underpinnings are weak for this stock market.

Investors ought to rely on proven adaptive models with a good track record in both bull and bear markets. A good example is ZYX Asset Allocation Model.  Donot become complacent and keep appropriate defensive measures in place.

 

Momo Crowd And Smart Money In Stocks

The momo crowd is acting like a yo-yo.  Smart money is inactive.

Gold

Gold briefly crossed over $1600 but now has pulled back.  The momo crowd is acting like a yo-yo.  Smart money is inactive.

For longer term, please see gold and silver ratings.

Oil

The momo crowd is acting like a yo-yo.  Smart money is inactive.

For longer term, please see oil ratings.

Marijuana

There is not discernable momo crowd or smart money activity in marijuana.

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 indeterminable, it will depend on what Trump says at 11:00 am ET.  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, bonds and currencies are volatile.

Gold futures are at $1573, silver futures are at $18.42, and oil futures are $62.33.

S&P 500 resistance levels are  3256, 3288 and 3300; support levels are 3223, 3200 and 3143.

DJIA futures are down 27  points.

MARKET OVERCOMES IRAN FEARS BUT DON’T BE COMPLACENT

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

Iran Fears

On Friday morning, immediately after the assassination of an Iranian general, at a time when the market was falling we wrote:

Historically, the impact of such incidents has been short lived. Experience is a great teacher. When the first Gulf war started in 1990, I started short selling the market only to see the market shoot straight up. Obviously at that time I did not have the experience I have now.

This is exactly what has happened so far.

The Chart

Please click here for the chart of ETF SPY in the immediate aftermath of an Iranian general’s assassination.  The VUD indicator shown on the chart is the most sensitive measure of net supply demand in real time. Note from the chart that there was significant buying.

Also note from the chart that after gap down, the market recovered for most of the day.

A similar pattern was followed yesterday.

Don’t Be Complacent

Iran will retaliate.  The retaliation is likely to be asymmetric because Iran cannot match the U. S. power.  Expect Iranians to be extremely smart about how they retaliate.  This is going to be a major risk factor going forward for several months or longer.  It is important to not be complacent.  Please pay attention to ‘What To Do Now’ section below.

Momo Crowd And Smart Money In Stocks

The momo crowd is acting like a yo-yo in the early trade.  The momo crowd was buying earlier in the morning after aggressively buying yesterday afternoon.  This morning when the market hit an important resistance level, momentum reversed as is often the case. As of this writing, the momo crowd is selling on momentum reversal.

Smart money is inactive.

Gold

When the stock market moved up yesterday, money started coming out of gold. The momo crowd acted like a yo-yo in gold yesterday and is doing the same this morning.  Smart money is inactive.

For longer term, please see gold and silver ratings.

Oil

When the stock market moved up, oil started pulling back.  The momo crowd was acting like a yo-yo in oil yesterday and is doing the same this morning.  Smart money is inactive.

For longer term, please see oil ratings.

Marijuana

There is no discernable momo crowd or smart money activity in marijuana.

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 and the market can easily swing 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 stronger.

Gold futures are at $1569, silver futures are at $18.21, and oil futures are $62.70.

S&P 500 resistance levels are  3256, 3288 and 3300; support levels are 3223, 3200 and 3143.

DJIA futures are down 34 points.

WEEKEND PRONOUNCEMENTS FROM IRAN AND TRUMP CAUSING CONCERN

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

Weekend Pronouncements

Over the weekend, Iran said that it plans to hit the U. S. military targets.  Trump has tweeted that he plans a disproportionate response if Iran strikes.  This is causing concern in the markets.

Momo Crowd And Smart Money In Stocks

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

Gold

The momo crowd is aggressively buying gold on Iran related concerns.  Smart money is inactive.

For longer term, please see gold and silver ratings.

Oil

The momo crowd is buying oil on Iran concerns.  Smart money is inactive.

For longer term, please see oil ratings.

Marijuana

There is no discernable momo crowd or smart money activity in marijuana.

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 and bonds are range bound.

The dollar is slightly weaker.

Gold futures are at $1576, silver futures are at $18.37, and oil futures are $63.76.

S&P 500 resistance levels are  3223, 3256 and 3288; support levels are 3200, 3143 and 3125.

DJIA futures are down 176 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 20% – 30% and short to medium-term hedges of  5% – 15% and short term hedges of 0% – 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.

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