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

Strong Income And Spending Data

American’s are earning more and spending more than expected.

Personal Income came at -4.2% vs. -.6.0% consensus.

Personal Spending came +8.2% vs. +7.0% consensus.

Fed Is Worried

It is said, “Watch what they do and not what they say.”  The Fed’s latest action shows that the Fed is very worried about the economy as coronavirus spreads.   In an unexpected move, the Fed has ordered big banks to cap their dividends and have also prohibited buybacks. In our over 30 years in the markets, we have never seen banks so well capitalized.  So why is the Fed taking this drastic step? There is only one explanation.  The answer has to be that the Fed expects a realistic scenario in which the economy may become much worse as the coronavirus spreads.

Of course the stock market gurus think that the realistic potential of the economy getting much worse as shown by Fed’s latest action is good news and investors should become fully invested.  Their reasoning is that if the economy gets worse, the Fed will print more money and politicians will borrow more  money.  In our analysis, it is foolish to buy into this prevailing wisdom of a free lunch and becoming aggressive in the stock market with fully invested long term positions.  

Instead, consider following the protection bands. 

Momo Crowd And Smart Money In Stocks

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

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 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 weaker.

Gold futures are at $1771, silver futures are at $18.09, and oil futures are $38.14.

S&P 500 futures resistance levels are  3075, 3114 and  3124: support levels are 3009, 2924 and  2870.

DJIA futures are down 167  points.

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

Increase Cash

Increase cash as economic data begins to weaken in virus hotspots such as Florida and Texas. Please scroll down to ‘Protection Bands and What To Do Now?’  section.

Jobless Claims

Initial Jobless Claims came at 1.48M vs. 1.25M consensus.   This is a leading indicator and is worse than expected.

GDP

GDP Third Estimate came at -5.0% vs. -5.0% consensus.  This is a lagging indicator.

Durable Orders

Durable Orders Ex-transportation came at +4.0% vs. +2.1% consensus.

Headline Durable Orders came at +15.8% vs. +11.6% consensus. This strong data is due to pent up demand

Momo Crowd And Smart Money In Stocks

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

For longer term, please see oil ratings.

Marijuana

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

Technical Patterns

Gold miners are tracing a double bottom.  This is bullish.  ETF of interest is GDX.

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 can quickly reverse to become positive if a short squeeze starts.  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 $1773, silver futures are at $17.74, and oil futures are $37.32.

S&P 500 futures resistance levels are  3075, 3114 and  3124: support levels are  3009, 2924 and  2870.

DJIA futures are down 124 points.

STOCK MARKET’S FAILURE TO OVERCOME THE IMPORTANT REVERSAL PATTERN IS A CLUE FOR PRUDENT INVESTORS

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

Election And Coronavirus Fears

First and foremost, I am politically agnostic. My sole job is to help investors.

President Trump’s rally in Tulsa reportedly had only 6,200 attendees in a 19,000 seat venue. Trump campaign has disputed these numbers. There are also reports that anti Trumpers manipulated the Trump campaign that resulted in this low attendance. Nonetheless, election fears are creeping into the stock market. Before you send me hate mail, recall that I correctly called Trump election at a time when Wall Street had anointed Hilary Clinton as the next president and gave aggressive buy signal on Trump election. Further, I was calling for stock market Dow Jones Industrial Average (DJIA) to reach 30,000 when it was in the 16,000 range and nobody was calling for such a big rise in the stock market. I repeated the call several times. . Also note that as the stock market approached my target, Wall Street stock market strategists were raising their stock market targets much higher but I never raised my target.

This is on top of increasing coronavirus cases. The secret sauce to handle stock market’s election and coronavirus fears is risk management. 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 popular stock market index Dow Jones Industrial Average.

Note the following:

• The chart shows that the stock market is in the support/resistance zone.
• The chart shows that RSI is on a buy signal but is flattening.
• The combination of the foregoing two items indicates that the risk in the stock market is much higher than generally believed.
• Wall Street loves Trump. Now there is a fear that Biden will be elected. In our analysis at The Arora Report, it is simply too early to call the election.
• If Biden gets elected, at a minimum, expect corporate income tax rate to go up from 21% to 28% and perhaps higher.
• Take a look at the chart on the left side of ‘mother of support zones’. A part of the rise in the stock market is due to higher corporate earnings, in part, due to lower taxes and less regulation.
• If Biden gets elected, expect earnings to take a hit of about 10% not only due to higher taxes but due to more regulation.
• The chart shows that due to coronavirus, the stock market fell to the top band of the mother of support zones and then rallied strongly.
• The chart shows that 65% of the first leg of the rally was short squeeze related. In practical terms it means that there is a lot of air under the market instead of solid support.
• A strong counter balance to the election and coronavirus fears is the Federal Reserve policy.
• The chart walks you through the increase in the Federal Reserve balance sheet from $0.87 trillion before the financial crisis to over $7 trillion now and on its way to $10 trillion based on the programs that the Fed has announced.
• There is an important reversal pattern in the stock market that you should watch. Please click here for the chart . In view of this pattern, it is important to watch three sets of stocks. The mega-cap tech stocks of Apple (AAPL), Amazon (AMZN), Facebook (FB), Microsoft (MSFT) and Alphabet (GOOG) (GOOGL). Battle ground stocks that provide an important indication of sentiment such as including American Airlines (AAL), Carnival Cruise (CCL), Hertz (HTZ) and Nikola (NKLA). Semiconductor stock including Intel (INTC), AMD (AMD) and Applied Materials (AMAT).
• Consider watching gold ETF (GLD), silver ETF (SLV) and gold miner ETF (GDX). Gold is threatening to breakout and may turn out to be a good hedge against money printing that is driving the stock market up.

The Secret Sauce

Under these circumstances, the secret sauce to handle these risks is proper risk management. Proper risk management has the following elements that need to be orchestrated correctly:

• A large amount of cash.
• Hedges or more cash for those who do not want to hedge.
• Protection band.
• Good long term positions based on fundamentals.
• Short to medium term tactical positions.
• Proper diversification based on sectors, strategies, time frames, correlations and geography.
• Short positions for those who are sophisticated and experienced or in the alternate inverse ETFs.
• Judicious use of stop losses or changes in allocations.
• Differentiation between strategic and tactical actions.
• Booking some profits as signals are given.
• Reliable sources of technical, fundamental and macro analysis.
• Staying nimble.

Momo Crowd And Smart Money In Stocks

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

Gold

Gold is threatening a breakout as concerns about money printing rise.

The momo is aggressively buying gold in the early trade.  Smart money is very lightly buying gold.

For longer term, please see gold and silver ratings.

Oil

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

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 can easily swing 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 down and bonds are ticking up.

The dollar is  weaker.

Gold futures are at $1771, silver futures are at $18.08, and oil futures are $39.64.

S&P 500 futures resistance levels are 3114, 3124 and 3155: support levels are 3075, 3009 and 2924.

DJIA futures are up 164 points.