WEEKLY MARKET DIGEST: LOWEST JOBLESS CLAIMS SINCE THE SHUTDOWN, POLITICIANS RUNNING AMUCK, HOUSE PRICES HIGHER $DJIA $SPX $QQQ $GLD $SLV $USO

WEEKLY MARKET DIGEST: LOWEST JOBLESS CLAIMS SINCE THE SHUTDOWN, POLITICIANS RUNNING AMUCK, HOUSE PRICES HIGHER $DJIA $SPX $QQQ $GLD $SLV $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.

HERE IS HOW HIGH THE STOCK MARKET MAY GO AFTER A DIP

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

Cross Currents

Investors are asking me how high can this stock market go.

The employment report is providing a relief for the stock market in that the jobs picture is improving.  Nonfarm Private Payrolls came at 1.462 million.  Normally I compare economic data with consensus forecast. In this case the forecasts were all over the place.  The key point is that optimists have proven to be right.

President Trump has banned TikTok and WeChat. In a normal market, this would be bad news for the stock market. However in this ‘market bad news is good news’.  The momo (momentum) crowd is excited about Facebook (FB) replacing TikTok.  The enthusiasm has caused a rip roaring rally in Facebook stock. At the same time the momo crowd is excited about Microsoft (MSFT) buying TikTok.  As both Microsoft and Facebook stocks are being bought aggressively on TikTok news, it does not seem to occur to the momo crowd that if Microsoft ends up buying TikTok, Microsoft will be a much stronger competitor to Facebook than TikTok ever was and this will be negative for Facebook.

How about retaliation from China? Apple (AAPL) is in the cross hair. What does the momo crowd do about this higher risk in Apple stock — they are oblivious and buying Apple stock aggressively on the momentum.

There are many cross currents.  Let’s explore the key question of how high the market can go with the help of a chart.

The Chart

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

Note the following:

  • A big chasm is developing between what stock market analysts say and what they know. To save their careers, analysts who are not independent, have no choice but to follow the momo crowd in the stock market. These days analysts’ calls have often become a case of the tail wagging the dog. Human nature as it is, anything can be justified.
  • Being independent, I have been able to call a spade a spade — the stock market is in a bubble but the bubble is likely to get bigger. This call is based on macro and fundamentals.
  • Under these circumstances, technical analysis is invaluable. The chart shows the measured target for S&P 500 is about 3800.
  • The measured target is produced by excluding the time period incased in a red rectangle on the chart. The reason for excluding this is because this period is characterized by the one-time abnormal occurrence of coronavirus.
  • If the period shown by the red rectangle is not excluded, the measured target will be much higher.
  • The chart shows that The Arora Report correctly called that the virus would hurt stocks prior to the fall in the stock market giving investors adequate warning to protect themselves.
  • Buy zones are very powerful. They often give investors opportunities to buy good stocks and ETFs at great prices. The chart shows that many stocks and ETFs fell into Arora buy zones during the market swoon. For example Apple could have been bought as low as $212.61 in the Arora buy zone and is trading at $452.96 as of this writing.  Microsoft could have been bought as low as $132.52 in the Arora buy zone, it is trading at $215.07 as of this writing.
  • The chart shows that RSI is overbought but has room to go higher.
  • It is important to note that Nasdaq 100 (NDX) represented by ETF (QQQ) has significantly over performed relative to S&P 500 and Dow Jones Industrial Average (DJIA). This is due to heavy weight of five mega cap tech stocks Apple, Microsoft, Amazon (AMZN), Facebook and Alphabet (GOOG) (GOOGL). Big institutions are hiding in the presumed safety of these stocks.  Watch these five stocks closely for clues to what is next in the stock market.
  • Consider watching popular momo stocks such as Fastly (FSLY) and Datadog (DDOG). The momo crowd ran them up to unrealistic heights prior to the earnings and is not suffering massive losses.

Opportunities Abound

A lot of money is to be made in an environment like this.  Consider using the concept of protection bands to protect your long term portfolios. In addition, consider opportunistically taking advantage of short to medium term opportunities as they arise. As a note of caution, the risk is much higher than generally believed.  It is important to be nimble, have access to proven independent sources and have risk control measures in place.

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.

Silver has experienced a massive short squeeze.  It ran up much higher on short squeeze last evening.  Then Asian investors sold causing silver to pull back.  Silver is on the rise again as U. S. momo crowd woke up and started buying again.

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.

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  stronger.

Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.

Gold futures are at $2064, silver futures are at $28.48, and oil futures are $41.58.

S&P 500 futures resistance levels are 3390, 3420 and 3460: support levels are 3320, 3278 and 3228.

DJIA futures are down 80 points.

LOWEST JOBLESS CLAIMS SINCE THE SHUTDOWN — POLITICIANS RUNNING AMUCK

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

Lowest Jobless Claims

Jobless Claims came at 1.186M vs. 1.40M consensus.  This indicates that more people are finding jobs. The stock market does not particularly like this data because in some circles there is recognition that an improving economy may hinder politicians running amuck.

Politicians Running Amuck

Politicians running amuck are the number one ally of the momo crowd that controls this stock market.  Neither momo crowd nor politicians like the facts.  Here are the facts:

  • Most data shows that the economy is improving.
  • Consumers are paying off credit card debit at a record rate because there is more money flowing in from government programs.
  • Deposable income has gone up during the pandemic.
  • Savings have gone up during the pandemic.

Certain industries and several groups of people have been badly hurt by coronavirus.  It is the government’s duty and obligation to help them.  It is not that difficult to tailor specific programs for these groups.  However, politicians come out ahead with their re-election campaigns by catering to their bases with broad based programs.  They are also able to raise more campaign funds when they help the rich get richer.  So in their self interest, they are running amuck with heavy borrowing and money printing.

Politicians running amuck is good for the stock market in the short term and is great for gold.  However in the long term, it is bad for investors and the country.  Our call has been that the bubble is going to get bigger.  The biggest danger to the stock market is a continuing stream of good data. 

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.

The momo crowd is extremely aggressively buying silver.

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.

Markets

Our very, very short-term early stock market indicator is negative but expect the momo crowd to push the market 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 and bonds are range bound.

The dollar is range bound.

Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.

Gold futures are at $2067, silver futures are at $28.18, and oil futures are $42.31.

S&P 500 futures resistance levels are 3390, 3420 and 3460: support levels are 3278, 3228 and 3182.

DJIA futures are up 41 points.

GOLD ON WAY TO $3000 — STOCK MARKET BULLS SHOULD CONSIDER IT AS INSURANCE

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

ADP Data

ADP is the largest payroll processor in the country.  It uses its data to give a glimpse of the official employment report prior to its release on Friday.

ADP came at 167K vs. 1.6M consensus.  The stock market correctly did not react to this very weak data because the prior was revised to 4.314M from 2.369M.

Answers To Your Questions

This is in response to questions after my prediction that gold was on its way to $3,000. Gold has moved above $2,000 for the first time since the prediction. Gold, in addition to being an investment by itself and a substitute for fiat currencies, should also be considered by stock market investors as insurance. Let’s explore with the help of a chart.

The chart

Please click here for an annotated chart of gold ETF (GLD).

Note the following:

  • From a technical perspective gold has broken out.
  • Gold has broken out after a very long base as shown on the chart.
  • A breakout to new highs after a long base is considered very bullish.
  • The chart shows that RSI has traced a very bullish pattern.
  • I have received quite a bit of hate mail from stock market investors who do not believe in gold and consider gold a worthless yellow piece of metal with no use. Many quote Warren Buffett’s dislike for gold.
  • In many ways, this call on gold is similar to the call I made on the stock market. When Dow Jones Industrial Average (DJIA) was in the 16,000 range, my call was for Dow Jones Industrial Average to reach 30,000. At that time nobody was talking about such a high number. I subsequently repeated that call.
  • I do have a track record with gold. The chart shows Arora Report call to back up the truck and buy gold when it was in the $600 range. The chart also shows the call to sell gold at $1,904, exactly on the day gold topped out before plunging to about $1,000.
  • Gold is not going to go up to $3,000 in a straight line. Gold is very overbought in the short term. When a commodity gets overbought, it is vulnerable to a pullback.

Insurance

Even the stock market bulls who normally do not invest in gold may consider buying gold on a pullback as insurance for their stock market portfolios. Here are a few scenarios to consider:

  • The present policies of money printing by the Fed and massive borrowing by the government may debase the U. S. dollar. Gold is priced in U. S. dollars. As the dollar weakens, initially both stock market and gold will benefit. In the longer term gold will continue to benefit from a weaker dollar but the U. S. stock market may be hurt.
  • If the economy worsens, real interest rates may go lower. This will benefit gold at a time when the stock market may go lower.
  • Gold works in both deflationary and inflationary environments. If the stock market goes lower because of deflation, gold may act as good insurance.
  • If inflation heats up, in the long run the stock market may fall but gold may benefit.
  • The stock market is in a bubble. The Arora Report call has been that the bubble will get bigger. If at some point the stock market bubble bursts, gold will benefit.
  • If the stock market falls due to a geopolitical event, a rush to safety will benefit gold.

Caution

There are some scenarios in which gold as an insurance for the stock market will not work and gold as an investment may also not work. Investors can easily experience large losses in gold. Here are five scenarios:

  • If interest rates rise, gold may fall.
  • If the dollar rises, gold may fall.
  • Gold is often sold at times of distress in the stock market as investors sell anything they can to meet margin calls.
  • Central banks hold large amounts of gold. It is conceivable that central banks may start selling their gold.
  • Gold is a very small market and it can be easily manipulated by the governments.

For the foregoing reasons it is important to properly do the following:

  • Portfolio structure
  • Allocation to gold
  • Changes to the portfolio with market conditions
  • Scaling into gold
  • Risk controls

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

API showed crude inventories fell by 8.6M barrels. This is very bullish data.

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

For longer term, please see oil ratings.

Markets

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

Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.

Gold futures are at $2052, silver futures are at $26.94, and oil futures are $43.30.

S&P 500 futures resistance levels are 3320, and 3390: support levels are 3278, 2228 and 3182.

DJIA futures are up 172 points.

BIGGEST INCREASE IN HOUSE PRICES IN SEVEN YEARS, BANKS TIGHTEN LENDING STANDARDS

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

House Prices

June home prices rose 4.9% year over year. Nationally this is the largest gain in seven years.

Lending Standards

Banks are significantly tightening lending standards.  This is a departure from  history in one respect.  Historically, banks tighten lending standards when house prices are not rising and the stock market is falling.

In our analysis, this indicates that banks are not divorced from the reality of Main Street while the stock market bubble gets bigger.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively 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 inactive.

For longer term, please see oil ratings.

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 stronger.

Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.

Gold futures are at $1991, silver futures are at $24.60, and oil futures are $40.36.

S&P 500 futures resistance levels are 3320 and 3390: support levels are 3228, 3182 and 3155.

DJIA futures are down 44 points.

SANCTIONS ARE COMING AGAINST A ‘BROAD ARRAY’ OF CHINESE SOFTWARE

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

Broad Array Of Sanctions 

The U. S. Secretary of State, Michael Pompeo, said that sanctions are coming against a ‘broad array’ of Chinese owned software.  This follows after Trump wanting to ban TikTok which is owned by the Chinese.  TikTok now has a large number of users among American teenagers.

In a normal market, there would have been a massive selloff this morning over Pompeo using the phrase ‘broad array’.   In this bubble market, the implications of worsening relations with China over software  are being totally ignored and so are the implications of China retaliating against U. S. software companies.  If that was not enough, instead of selling, stocks are being aggressively bought on the prospect of MSFT buying the U. S. operations of TikTok.

How do you clearly tell that the market is in a bubble?  The behavior described above is a clear sign of a bubble.

As a note of caution for our subscribers who tend to be prudent investors, this is not a signal to wholesale sell. The call has been that the most likely scenario is for the bubble to get bigger.   The best thing to do right now under these conditions is to follow the protection bands. Please scroll down to the section ‘Protection Bands and What To Do Now?’.

Momo Crowd And Smart Money In Stocks

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

Gold

Gold is approaching the psychological resistance level of $2,000.

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

The momo crowd is buying silver in the early trade.

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.

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 are ticking up and bonds are ticking down.

The dollar is  stronger.

Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.

Gold futures are at $1983, silver futures are at $24.39, and oil futures are $40.30.

S&P 500 futures resistance levels are 3320 and 3390: support levels are 3278, 3228 and 3182.

DJIA futures are up 124 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.

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