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

More Money Printing

The Federal Reserve has announced a new unprecedented $2.3 trillion program to support the economy. New jobless claims have surged to 6.606 million.

A Golden Age Ahead For Investors

A golden age for stock market investors who do not believe in being average is ahead. Massive opportunities in the stock market will rise due to a major shift in the economy post coronavirus. The emphasis here is on the word ‘average’. The reason is that there will be winners and losers in the stock market. Investors who believe in being average invest in stock market index S&P 500 (SPX). Investors who do not want to be average pick stocks and non-broad based ETFs. Let’s explore with the help of a chart.

The Chart

Please click here for an annotated chart of Dow Jones Industrial Average (DIA) which represents the popular stock market index Dow Jones Industrial Average (DJIA)

Note the following:

• This is a monthly chart to give stock market investors a long term perspective.
• The latest rise in the stock market is due to the Fed deciding to print $2.3 trillion more in new money.
• Since The Arora Report signal to buy stocks aggressively in March 2009 as shown on the chart, the stock market has had a major advance in spite of the recent drop related to coronavirus.
• The chart shows that the recent rally in the stock market is about 65% related to short squeeze. In a short squeeze, investors who have sold stocks short feel compelled to buy leading to an artificial rise in the stock market.
• Investors have said there was no warning of the coronavirus. That’s untrue. On Jan. 22, The Arora Report’s call was that the coronavirus could cause a drop in the market. After finding that investors continued to buy stocks, I wrote on Jan. 30 that arrogance and greed among momentum investors “may prove to be dangerous for investors.” Other than a potential cure, the course of the stock market rally will depend on the behavior of naked investors.

Major shifts in the economy

Take a look at the following in the context of how high the stock market has risen since the Arora buy signal in March 2009;

• The government will become a bigger part of the American economy.
• Americans will have less privacy and fewer rights.
• Poor, lower middle class and the rich will do better as the government programs will help them. Upper middle class such as professionals will get squeezed with higher taxes.
• A segment of the population will start saving more.
• More people will work from home.
• Corporations will not want to own or rent as much office real estate as before.
• Online education will become more popular.
• Colleges and universities will come under financial pressure.
• The shift to cloud will accelerate.
• Telemedicine will become popular.
• More people will buy groceries on line.
• There will be a golden age of biotechs.
• Supply chains will shift closer to home.
• Consumers will horde.
• Corporations will hold more inventory.
• Active stock and ETF pickers will shine.
• Investors will struggle with the potential of massive deflation first and eventual massive inflation.
• Many brick and mortar retailers will be in trouble and so will the shopping malls.

Momo Crowd And Smart Money In Stocks

The momo crowd was selling stocks earlier in the morning until the Fed announced more money printing.  The Fed announcement  caused the momentum to reverse. As of this writing, the momo crowd is extremely aggressively buying stocks.

Smart money is lightly selling stocks into the strength.

Gold

Gold is rocketing on more money printing.  Both momo crowd and smart money are buying gold.

For longer term, please see gold and silver ratings.

Oil

Oil is awaiting the decision from OPEC+.  The momo crowd is buying oil.  Smart money is inactive.

For longer term, please see oil ratings.

Marijuana

The momo crowd is buying 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 positive but can quickly swing 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  weaker.

Gold futures are at $1713, silver futures are at $15.56, and oil futures are $26.27.

S&P 500 futures resistance levels  is 2785: support levels are 2636, 2600 and 2520.

DJIA futures are up 467 points

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

Extreme Bold Bets

In a rare occurrence, the momo crowd is placing extreme bold bets on technology stocks.  This is not a good setup because at extreme, sentiment is a contrary indicator.  In plain English, this means that the extreme positive sentiment is a sell signal.

A detailed post on money flows in tech stocks will be published shortly in ZYX Buy and ZYX Short.  Due to heavy interest in this subject from subscribers in ZYX Global and ZYX Emerging, the post will also be reproduced there.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying stocks in the early trade after incurring huge losses yesterday.  Smart money is inactive.

Gold

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

For longer term, please see gold and silver ratings.

Oil

API data showed inventory build of 11.938M barrels vs. consensus of 9.3M barrels.  This data is bearish for oil.  However the momo crowd is buying oil on the hope that Trump will do his magic with Saudi and Russia.  Smart money is inactive.

For longer term, please see oil ratings.

Marijuana

The momo crowd is buying 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 neutral 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 $1686, silver futures are at $15.34, and oil futures are $24.22.

S&P 500 futures resistance levels is 2785: support levels are 2636, 2600 and 2520.

DJIA futures are up 318 points

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

Greed Overtakes Fear

Greed in the stock market has mostly taken over fear after reports of slowing new coronavirus cases in New York and Europe. Is it prudent to chase the rally? The answer is ‘No’ without knowing where you belong in the protection band (more later). The best way to analyze the stock market is to analyze in multiple time frames. Let’s examine with the help of two charts.

Two charts

Please click here for an annotated chart of Dow Jones Industrial Average (DIA) which represents popular stock market index Dow Jones Industrial Average (DJIA).

Please click here for an annotated chart of S&P 500 ETF (SPY) which represents the popular stock market index S&P 500 (SPX).

Note the following:

• The first chart is a long term chart to give a long term perspective.
• The second chart is a short term chart to give a short term perspective.
• The second chart shows that 60% of the rally is driven by short squeeze. In a short squeeze shorts sellers feel compelled to buy to cover. This is artificial buying and sooner or later exhausts itself.
• The second chart shows a breakout.
• The second chart shows resistance zone that is overhead.
• The second chart shows RSI divergence. In plain English, it means that RSI went up as the stock market price went down.
• In isolation, the second chart is giving an all clear signal to buy stocks. However investors should never look at only one time frame. It is important to look at multiple time frames.
• The conclusion from the first chart is quite different from the second chart. In total, the first chart is still showing that this rally is a relief rally and the probability is reasonably high for the rally to fail.
• Earnings season is ahead. Companies are likely to cut or withdraw guidance.
• There is about $6 trillion worth of monetary and fiscal stimulus. In the short term that is helpful to the stock market. Are there no consequences in the long term of printing and borrowing money?
• Investors have said there was no warning of the coronavirus. That’s untrue. On Jan. 22, The Arora Report’s call was that the coronavirus could cause a drop in the market. After finding that investors continued to buy stocks, I wrote on Jan. 30 that arrogance and greed among momentum investors “may prove to be dangerous for investors.” Other than a potential cure, the course of the stock market rally will depend on the behavior of naked investors.

Key stocks

In addition to stock market indexes, it is important to keep an eye on large-cap tech stocks such as Apple (AAPL), Amazon (AMZN), Alphabet (GOOG) (GOOGL) and Facebook (FB). The rally in these stocks is showing that investors believe coronavirus is not a big deal.

Semiconductors have been a leading indicator. The rally in semiconductor stocks such as AMD (AMD), Intel (INTC) and Micron (MU) would have you believe that the coronavirus crisis is over.

Is the stock market getting divorced from reality? Let us hope that President Trump is right about hydroxychloroquine as a cure. Based on our sources, hydroxychloroquine is being widely used but there are still no credible large scale trial results. Many other drugs look promising but science is replete with failures in drug trials. As optimistic as investors are about a vaccine, in our analysis at The Arora Report, the vaccine is likely 18 months away.

It is true that we have learned how to make a vaccine for the flu and Tamiflu helps but there is still no cure for the flu. Coronavirus is much more dangerous than the flu. In spite of massive efforts, there is no cure or vaccine for the common cold. HIV cocktail is a great success but there is still no vaccine. The stock market is clearly divorced from reality.

Momo Crowd And Smart Money In Stocks

The momo crowd is extremely aggressively buying stocks.  Smart money is selling into the strength.

Gold

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

The momo crowd is aggressively buying 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.  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 $1694, silver futures are at $15.62, and oil futures are $26.50.

S&P 500 futures resistance level is  2785: support levels are 2636, 2600 and  2520.

DJIA futures are up 842 points

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

Rushing Headlong

In stock market investing, often the hardest and most profitable thing to do is to go against the crowd. The prevailing wisdom among the stock market crowd now is to buy stocks when the number of new coronavirus cases slows.  As of this writing, the data from Italy, Spain, France, Germany and most importantly New York indicates that at a minimum the number of new cases may have peaked. Many investors are rushing headlong into the stock market.

Naked Investors

In our analysis at The Arora Report, the near term course of the stock market will depend primarily on the behavior of ‘naked investors’ (more later) and secondarily on news related to cures or partial cures of coronavirus such as from hydroxychloroquine trials. Of note is that Trump has been on a spree to tout hydroxychloroquine. Trump even made a phone call to India’s Prime Minister Modi to get more supply of hydroxychloroquine.

Instead of running with the stock market crowd, why should pay attention to the analysis at The Arora Report? Human nature as it is, we all like to justify our actions without being objective. To justify being naked, and also subsequently naked investors have been screaming from the rooftops that nobody saw coronavirus coming and nobody called the coronavirus impact on the stock market. This could not be further from the truth. First on January 22, 2020 The Arora Report call was that coronavirus could cause a major drop in the stock market. After finding that investors continued to buy stocks, I relented my usual polite ways and wrote on January 30, 2020: “The reaction to the coronavirus shows that there is an unprecedented amount of arrogance among the momo (momentum) crowd and the people who influence them. The stock market these days is controlled by the momo crowd. This combination of greed and arrogance may prove to be dangerous for investors.” Let’s explore with the help of a chart.

The Chart

Please click here for an annotated chart of Dow Jones Industrial Average ETF (DIA) which represents the popular stock market index Dow Jones Industrial Average (DJIA).

Note the following:

• The chart shows The Arora Report signal to protect long term portfolios up to 57% on February 19, 2020 when the popular stock market benchmark S&P 500 index (SPX) was hitting a new high. The chart shows that the protection was increased up to 86% shortly thereafter.
• Who are the naked investors? The naked investors are those who were fully invested in the stock market at the peak and many were buying on margin. In spite of warnings, these investors chose to go naked without any protection for their portfolios. This was like going out naked when the winter started and refusing to wear clothes when going out as the temperature got colder.
• The data we gather at The Arora Report shows that for the most part, naked investors are still fully naked. They continue to believe that the best strategy in the stock market is to be always naked because the stock market always goes up.
• The data from 1987 crash, from 2000 tech bubble burst and 2008 great recession shows that the naked investors hold on to their belief until the stock market rallies 20 – 30%. Upon such a rally, naked investors breathe a sigh of relief that their losses are smaller and start selling.
• When the stock market goes about 5 – 10% above the top band of the support/resistance zone shown on the chart, based on the past data, the expectation is that naked investors will start selling and thus containing any rally absent a cure for coronavirus.

Watch These Stocks

Naked investors are concentrated in two groups: large-cap tech stocks such as Apple (AAPL), Amazon (AMZN) and Microsoft (MSFT) and semiconductor stocks such as AMD (AMD), NVIDIA (NVDA) and Intel (INTC). For important clues, consider watching these six stocks to see if their relative strength slows.

Momo Crowd And Smart Money In Stocks

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

Gold

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

For longer term, please see gold and silver ratings.

Oil

OPEC plus Russia meeting scheduled for today has been postponed to Thursday. Oil first fell on the news but is rallying as of this writing on the report that Saudi and Russia are close to an agreement.

The momo crowd is acting like a yo-yo in oil this morning.  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

Spanish shares are tracing an insider bar.  This is bullish. ETF of interest is EWP.  The buy zones for EWP and EWI are likely to be raised in ZYX Emerging.

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 stronger.

Gold futures are at $1676, silver futures are at $14.80, and oil futures are $27.28.

S&P 500 futures resistance levels are  2600  and  2636: support levels are  2520, 2443 and 2417.

DJIA futures are up 783 points.