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

Budding Rally

Yesterday afternoon, a set up came as close to perfect as we have ever seen for a strong rally to start.  Then came the news that Trump was not going to sign the Senate passed spending bill.  This was due to a rebellion in the House by conservative Republicans who wanted funding for the boarder wall.  Until the rebellion, the consensus had built that the government would not shut down.

Later the House passed a spending bill with funding for the boarder wall.  Political experts are saying that the House bill is dead on arrival at the Senate.

This situation is now unpredictable.  We can share with you the historical data that market dips on a government shutdown have almost always been a buying opportunity.

Now the setup is in question because of the news.

Slower Data

Durable Goods ex-transport came at -0.3% vs.  0.3% consensus.

GDP-3RD estimate came at 3.4% vs. 3.5% estimate.

Office Closed

Our offices will be closed on Christmas Eve.  There will be no Morning Capsule.

Momo Crowd And Smart Money In Stocks

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

Gold

Gold is holding on to its gains but the dollar is beginning to get stronger again.  If the dollar continues to get stronger, gold will give up its gains.

Oil

There is more selling pressure in oil.

Marijuana

The momo crowd is aggressively buying marijuana stocks in the early trade.  The 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 swing negative based on the government shutdown news.

Interest rates and bonds are range bound.

Gold futures are at $1263, silver futures are at $14.80, and oil futures are $45.66.

S&P 500 resistance levels are 2500, 2550 and 2594; support levels are 2450, 2425 and 2400.

DJIA futures are up 9 points.

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

Powell prevents ultimate stock market crash by throwing red meat to the bears

Fed Chairman Powell is being universally criticized for what he had to say in the press conference after release of the Fed policy statement. The stock market is giving Powell thumbs down. Could Powell be smarter than the rest of the gurus? Let’s explore with the help of a chart.

The chart

Please click here for an annotated chart of S&P 500 ETF (SPY). Similar conclusions can be drawn from the charts of Dow Jones Industrial Average (DJIA), Nasdaq 100 ETF (QQQ) and small cap ETF (IWM). Please note the following from the chart:

• The market fell on the release of the Fed statement.
• The market was in the process of recovering going into the press conference.
• The market fell on what Powell said in the press conference.
• The VUD indicator is the most sensitive measure of net supply demand in real time.
• The VUD indicator shows that the selling was not as intense as it could have been.
• The VUD indicator also shows that at the end of the day there was net buying demand even though the price did not recover.
• Not shown on the chart is an important factor and that is that the dollar has been slightly weaker. If critics of Powell are right, the dollar should have been stronger.
• Looking at individual charts of popular stocks, VUD indicator shows that selling was intense in stocks such as Apple (AAPL), Amazon (AMZN), Netflix (NFLX) and NVIDIA (NVDA).
• The selling in popular stocks such as Facebook (FB), Micron (MU), AMD (AMD) and Johnson & Johnson (JNJ) should be disregarded because that was primarily driven by individual company news.

Throwing red meat to the bears

Here is how Powell threw red meat to the bears.

• The market wanted no rate hike or at most one rate hike in 2019. Powell talked about two rate hikes in 2019.
• The market wanted some accommodation regarding the Fed’s massive balance sheet. Powell stayed firm on the current course of unwinding.
• The market wanted some empathy for the decline in the stock market. Powell showed none.

Stopping the ultimate crash

In 2007, when the stock market was doing great, house prices were going through the roof and many of the same gurus who are now criticizing Powell were in la la land, we called for investors going into 100% protection mode. The call was to protect 100% of the portfolio with a combination of cash and hedges. In early 2008, our call was to accumulate inverse ETFs that go up when the market goes down and to also aggressively short for those investors who could short. In 2008 when most portfolios lost one half of their value, The Arora Report turned in an impressive 45.9%.

In March of 2009, which with the benefit of hindsight turned out to be the bottom of the stock market, The Arora Report call was to aggressively buy stocks,

In the long term, the very low interest rates and Fed’s large balance sheet is simply not sustainable especially in view of rising national debt and slowing growth.

Isn’t it better to have small doses of the medicine now when the economy is doing great and the stock market has done well over the last nine years compared to experiencing another crash?

We certainly do not like to see the market going down and investors losing money. However, the alternate is a market crash down the road.

Our success at The Arora Report is in part due to the sophisticated adaptive ZYX Asset Allocation Model. In plain English, adaptive means the model changes itself with changing market conditions. Please click here to see how it is done. The static models suffer from the disadvantage that they may work under some market conditions but not work under other conditions. Adaptiveness is important now because the character of the market is changing as we have been sharing with you since October.  We also started work on a new expanded Bullet Proof Your Portfolio and Increase Your Returns coaching seminar to help investors prosper in what is to come.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively selling stocks in the early trade.  The smart money is selectively and lightly buying.

Gold

Money is flowing into gold out of stocks.

Oil

Oil is weaker along with the stock market.

Marijuana

Marijuana stocks have so far hung in there but may start feeling the weakness of the rest of the market.

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 easily swing negative.

Interest rates and bonds are range bound.

Gold futures are at $1263, silver futures are at $14.86, and oil futures are $46.57.

S&P 500 resistance levels are 2550, 2594 and 2615; support levels are 2450, 2425 and 2400.

DJIA futures are down 57 points.

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

The Critical Fed Decision

The Fed will announce its decision on interest rates at 2:00 pm ET.  Here are the key questions:

• Will the Fed raise interest rates?
• Will the Fed indicate a pause for the time being to raise rates further?
• How many rate hikes in 2018?
• Will the Fed be hawkish or dovish compared to the consensus?
• What is the Fed’s assessment of the economy?
• What is the Fed looking at to make the decisions?

Of course we will be paying close attention and carefully listening to the press conference to be held at 2:30 pm.

Market Reaction

Often it is clear before hand how the market will react to a certain Fed decision.  However this is not one of those times.  The positioning of the big institutions appears to be such that the market may react in a manner that may not make any sense logically.

Please also keep in mind that often the first market reaction to the Fed is wrong.

Santa

Yes there is doom and gloom, but there are reasons for a short term rally to develop if the news such as the government shut down or trade issues do not get in the way.

• The Fed Chair, Powell, may become dovish in the face of data showing that the economy is slowing. Of course if the Fed stays hawkish, then this market can fall by a significant amount.
• From a technical perspective the market is very oversold. Oversold markets tend to bounce in the short term
• A lot of short selling has occurred. These shorts can be easily squeezed to the upside.
• Some sentiment measures are becoming very bearish. If they start becoming extremely bearish, which is the next step; it is often a contrary indicator. In plain English, when most people get extremely bearish, the market rallies.

No rose colored glasses

Before accusing us of wearing rose colored glasses, look at the track record of The Arora Report. The Arora Report recommended going into a combination of 100% cash and hedges in 2007 prior to the 2008 crash. In 2008, The Arora Report aggressively added inverse ETFs that go up when the markets go down and aggressively short sold for those who could short sell. In 2008 when most portfolios lost half of their value, The Arora Report subscribers generated a positive return of 45.9%. The Arora Report turned aggressively bullish in March of 2009 which in retrospect turned out to be the bottom and the start of a big bull market.

You already know that starting in October we started warning that the character of the market was changing. Again starting in October we have been telling investors that what has worked over the last nine years may not work going forward.  Based on your requests, we also started work on an updated and expanded version of the coaching seminar Bullet Proof Your Portfolio and Increase Your Returns so that you are better prepared to make money in what is to come.

Is not a consistent long record of prescient foresight from The Arora Report better than the hindsight that is freely available everywhere?

Reduce Cash And Hedges

Please see the ‘What To Do Now’ section below.  There is a caveat.  If the new data is vastly different from the present range of expectations, this change may be quickly reversed. This is the time to be nimble.

Momo Crowd And Smart Money In Stocks

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

Gold

Historically the momo crowd buys gold before the Fed announcement.  Today is no different.  If the Fed becomes dovish and the dollar falls as a result, in theory, gold should go up. The counter balance will be money potentially flowing out of gold into stocks in the foregoing scenario.

Oil

Oil was mercilessly sold after it broke the support.  Remember that the momo crowd was buying oil aggressively over $70 and predicting $100 oil not that long ago.  Now the momo crowd is sitting on big losses and facing margin calls.  A lot of the selling appears to be forced selling.

Marijuana

ALEAF is buying EMMBF.  The combination will create the largest medical cannabis clinic network in Canada.

TLRY is experiencing another mini short squeeze after announcement of a deal with the pharmaceutical company NVS.

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 swing based on the Fed.

Interest rates, bonds and currencies are range bound waiting on the Fed.

Gold futures are at $1252, silver futures are at $14.75, and oil futures are $46.77.

S&P 500 resistance levels are 2594, 2615 and 2631; support levels are 2500, 2450 and 2425.

DJIA futures are up 162 points.

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

Positive Data Point

Nothing has changed in the stock market over the last three decades in four respects.

• When the stock prices go down, bearish gurus come out of the woodwork and start fear mongering.
• When the stock prices go up, bullish gurus come out of the woodwork and start making rosy predictions.
• Many gurus appear to look at what the stock prices are doing and then come up with the arguments to justify the stock price.
• When the stock prices are going down the media gives prominence to the bears. When the stock price is going up the media gives prominence to the bulls.

Often investors get whipsawed or misled by the foregoing. Shouldn’t the gurus be first objectively looking at all of the data and not just the data that supports the action in the stock prices? Let’s look at a chart that shows a positive data point.

The Chart

Please click here for the annotated chart of VIX (VIX). The chart compares VIX with Dow Jones Industrial Average (DJIA), S&P 500 ETF (SPY), Nasdaq 100 ETF (QQQ) and small cap ETF (IWM). Please note the following from the chart.

• VIX is also known as the fear index. It goes up when the market goes down.
• Even though the market has gone lower, the VIX has not gone higher than the prior recent peaks.
• The VIX is much lower than the spike in February 2018.
• Not shown on the chart, but it is very instructive to watch the price action in VIX ETF (VXX). Recently VXX tends to fall rather quickly when the intraday downward momentum in stocks such as Apple (AAPL), Amazon (AMZN), Facebook (FB) and Netflix (NFLX) stalls. There is also a high correlation with semiconductor stocks NVIDIA (NVDA), AMD (AMD) and Micron (MU).
• This indicates that there are a lot of sellers of volatility in the market.
• The sum total of the foregoing is that many sophisticated players appear to be positioning for a rally in the short term.

From a long term perspective, this means that weak hands have not been taken out. Typically lasting medium term bottoms are not formed until weak hands are taken out.

Santa

Yes there is doom and gloom, but there are reasons for a short term rally to develop if the news such as government shut down does not get in the way.

Momo Crowd And Smart Money In Stocks

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

Gold

Money is flowing into gold out of stocks.

Oil

Oil is being aggressively sold on oversupply concerns.

Marijuana

Marijuana stocks have held up relatively well in the down turn.  This indicates that at least temporarily sellers in marijuana stocks are exhausted.

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 easily swing negative.

Interest are ticking down and bonds are ticking up.

Gold futures are at $1250, silver futures are at $14.69, and oil futures are $49.28.

S&P 500 resistance levels are 2594, 2615 and 2631; support levels are 2550, 2500 and 2450.

DJIA futures are up 147 points.

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

Political Uncertainty Stops Budding Rally

Markets across the world are oversold.  Last night there was optimism in Asia. Stock futures in the U. S. were attempting a rally.  By early this morning, the momo crowd was aggressively buying.

As the morning progressed, the reality from political uncertainty set in causing a selloff.

Here are the two new political uncertainties.

• A judge in Texas ruled Obamacare unconstitutional.
• Trump is threatening to shut down the government if he does not get funding for his wall.

Momo Crowd And Smart Money In Stocks

The momo crowd was aggressively buying in the early morning and then flipped to aggressive selling.  Smart money is inactive.

Gold

Buying is coming into gold as the dollar is weaker.  Some money is moving out of stocks and into gold.

Oil

Oil is moving with the stock market.

Marijuana

A Colorado Senator is trying to find ways for marijuana businesses to use the banking system instead of cash.  This is creating some optimism.  The momo crowd was aggressively buying marijuana stocks in the early trade but the buying has fizzled as of this writing.

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 was positive early this morning but has swung negative as of this writing. Expect the market to open lower and it can go either way from there.  There is simply too much noise in the data due to very high volatility.

Interest rates are ticking down and bonds are ticking up.

The dollar is weaker.

Gold futures are at $1243, silver futures are at $14.67, and oil futures are $51.36.

S&P 500 resistance levels are 2615, 2631 and 2658; support levels are 2550, 2500 and 2450.

DJIA futures are down 112 points.