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.
OVER ENTHUSIASM ABOUT TRUMP TWEET MARKET MAY RETRACE, BLOWOUT JOBS
To gain an edge, this is what you need to know today.
Over Enthusiasm About Trump Tweet
There is over enthusiasm in the market about Trump tweet. Trump tweeted about a good conversation with China’s President Xi. However China has little reason to help Trump before the mid-term election. Once the market realizes this, the market may retrace.
Blowout Jobs
Non-farm Private Payrolls came at 246K vs. 185K consensus.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively buying stocks. Smart money was selling into the strength earlier this morning. In the early trade the market has pulled back and the smart money has stopped selling. Smart money seems to be interested only in selling at higher prices.
Gold
The momo crowd is aggressively buying gold but smart money is lightly selling gold into the strength.
Oil
Oil has been slaughtered based on a Trump tweet that there is plenty of oil.
Marijuana
The momo crowd is aggressively buying marijuana stocks. 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 neutral.
Interest rates are ticking up and bonds are ticking down.
Currencies are mixed.
Gold futures are at $1233, silver futures are at $14.76, and oil futures are $63.14.
S&P 500 resistance levels are 2765, 2800 and 2840; support levels are 2740, 2700 and 2688.
DJIA futures are up 149 points.
MID-TERM ELECTION, JOBS REPORT, POSITIVE SEASONALITY BUT WEAK HANDS NOT WASHED OUT
To gain an edge, this is what you need to know today.
Mid Term Election
Mid-term election is next week. The consensus on Wall Street is that the market will go up after the election irrespective of who wins. The reasoning is that the uncertainty will be lifted.
In our analysis, consensus has a high probability of being right; none the less if Democrats win big, they will start Trump investigations. Such investigations may create a negative sentiment.
Jobs Report
The jobs report is known as the mother of all numbers. It will be released at 8:30 am ET tomorrow (Friday). Historically institutions often buy the day before and runup the market in anticipation of a good jobs report. This time it may be different because of the volatility in October.
Unemployment Claims
Initial Unemployment Claims came at 214K vs. 213K consensus. This is a leading indicator and carries a heavy weight in our models.
Positive Seasonality
The positive seasonality period is starting. However the weak hands were not washed out during the October volatility and this makes rallies suspect.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively buying in the early trade. The smart money is inactive.
Gold
Gold is flying on weaker dollar.
Oil
Oil was aggressively sold yesterday afternoon after bearish inventory data.
Marijuana
The momo crowd is aggressively buying marijuana stocks. The smart money is inactive.
Technical Patterns
Gold miners are tracing a hammer. 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 positive but can quickly swing negative.
Interest rates and bonds are range bound.
The dollar is weaker.
Gold futures are at $1231, silver futures are at $14.57, and oil futures are $65.06.
S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.
DJIA futures are up 82 points.
SAMSUNG CALLS END OF THE CHIP BOOM
To gain an edge, this is what you need to know today.
End Of The Chip Boom
Normally we focus on macro picture and not on individual companies in the Morning Capsule. However the following goes to the heart of the world economy.
Semiconductors are the life blood of the modern economy. Samsung is one of the world’s biggest semiconductor manufactures. Investors should listen when Samsung calls for end of the chip boom because this is exactly what Samsung has just done. Samsung obviously believes in its prediction because it is slashing its capital expenditures by more than a quarter and warning of lower profits next year.
Paradoxically, the market may react to this very negative prediction in a positive way. The theory may be now that Samsung is slashing capital expenditures, this will reduce capacity. After the capacity is reduced, semiconductor boom may come back. Remember the market looks six to nine months ahead.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively buying stocks in the early trade. The smart money is selectively buying and selectively selling.
Gold
Gold is being hit hard on the stronger dollar and momo crowd selling.
Oil
API reported crude inventories rose by 5.7 million barrels vs. 3.3 million consensus. However API also showed a decline of 3.5 million barrels for gasoline. The data is mixed and oil is range bound waiting for EIA date to be released at 10:30 am.
Marijuana
The momo crowd is aggressively buying marijuana stocks in the early trade. After having lightly bought marijuana stocks during the dip, 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.
Interest rates are ticking up and bonds are ticking down.
Gold futures are at $1215, silver futures are at $14.29, and oil futures are $66.06.
S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.
DJIA futures are up 196 points.
THE CHART SHOWS NOVEMBER 1 IS THE ‘MAKE OR BREAK’ DAY FOR THIS STOCK MARKET, WORST REVERSAL SINCE 2015
To gain an edge, this is what you need to know today.
Critical November 1 Date
November 1 is the ‘make or break’ day for this stock market.
Please click here for the chart of Apple (AAPL) stock compared to Amazon (AMZN) stock, First Trust Dow Jones Internet Index Fund ETF (FDN), Dow Jones Industrial Average (DJIA), S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ). Please note the following:
- Apple stock has held up well against Amazon (AMZN) stock.
- The most appropriate comparison is of Apple stock to Internet ETF FDN. The Internet ETF contains popular stocks such as Facebook (FB), Netflix (NFLX), Google (GOOG) (GOOGL), Akamai (AKAM) and Twitter (TWTR).
- Apple stock has also held up well against its suppliers such as Micron (MU), Skyworks (SWKS), Broadcom (AVGO), Qualcomm (QCOM) and Qorvo (QRVO).
Apple will report earnings November 1st after the close. Whisper numbers for Apple are higher than the consensus numbers. Stocks move based on the difference between the whisper numbers and the reported numbers.
Apple has been the last domino standing. Will it fall? If it falls, watch out below — but this warning has to be tempered because of the six factors that can ignite a rally. Please see the post from yesterday titled, INTELLIGENCE: THE BIG RED HAT PREMIUM RESCUES THE MARKET BUT WHERE IS THE BOTTOM. Of course if Apple earnings are good, it may also ignite a rally.
Money Flows
We will update money flows in tech stocks later today.
Prudent investors who want an edge and lower their risk find that segmented money flows are the best tool to give them the edge. For months when the popular tech stocks were levitating, The Arora Report has been sharing with you that the smart money was consistently selling into the strength while the momo (momentum) crowd was aggressively buying at the highly elevated prices. Interestingly as popular tech stocks have fallen, smart money is mostly inactive and at times a light buyer. But the momo crowd is aggressively selling into the drop. The Arora Report had been cautioning against over concentration in tech when tech was near its highs. For two classic examples, take a look at the charts of AMD (AMD) and NVIDIA (NVDA). In both cases, momo crowd has suffered massive losses but smart money made out like a bandit.
Worst Reversal Since 2015
S&P 500 experienced the worst reversal since 2015. As we have been keeping you informed, weak hands have still not been washed out. Historically a rally should start after the weak hands are washed out. There is potential for this to happen this week.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively buying in the early trade. Smart money is being very selective — they are buying some stocks and selling other stocks.
Euro Area Growth
Euro area GDP came at 0.2% vs. 0.3% consensus. This is the weakest level in four years.
Gold
Gold is taking a hit on stronger dollar. Otherwise the trading is fairly listless.
Oil
Earlier smart money was selling oil in anticipation of a bearish report from API at 4:30 pm ET. The momo crowd was aggressively buying oil earlier today and yesterday.
Marijuana
The momo crowd is aggressively selling marijuana stocks in the early trade following the action against IGC by the exchange. Investors are beginning to recognize the institutional bias against marijuana. While smart money has long recognized institutional bias against marijuana and is prepared to make money from this bias, the momo crowd is falling victim to this bias. The momo crowd simply does not understand the negative institutional bias. Unfortunately this negative bias is hurting many small investors. The silver lining is that small investors will be more motivated to learn from this experience and perhaps go on to make a fortune in marijuana.
Technical Patterns
Several tech stocks are making a megaphone top. This is bearish. ETFs of interest are XWEB and XLK.
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 can swing either way.
Interest rates are ticking up and bonds are ticking down.
The dollar is stronger.
Gold futures are at $1227, silver futures are at $14.47, and oil futures are $65.52.
S&P 500 resistance levels are 2658, 2661 and 2688; support levels are 2631, 2615 and 2594.
DJIA futures are down 26 points.
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BIG RED HAT PREMIUM GENERATES POSITIVE SENTMENT IN STOCKS, HOTTER INFLATION, BRAZIL TAKES A HARD RIGHT TURN
To gain an edge, this is what you need to know today.
Red Hat Premium
IBM (IBM) is paying a 63% premium for Red Hat (RHT). This is generating positive sentiment in the stock market. We will do a separate post on ZYX Buy and if there are enough requests from subscribers, it will be published on other feeds based on the demand.
Where Is The Bottom?
We will do a separate post.
Hotter Inflation
The Fed’s favorite measure of inflation is Core PCE. For this reason, this should also be the favorite inflation indicator for prudent investors.
Core PCE came at 0.2% vs. 0.1% consensus.
Brazil Takes A Hard Right Turn
Brazil is taking a hard right turn with the election of Bolsonaro. Please be aware that the momo crowd is running up Brazilian stocks in the early trade but smart money is selling into the strength. But don’t get burned if your are a short term trader.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively buying stocks. The smart money is inactive.
Gold
Gold is holding on to most of its gains but may give up those gains if stocks strengthen.
Oil
Trading in oil is listless.
Marijuana
The momo crowd is aggressively buying 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 quickly swing.
The dollar is stronger.
Interest rates are ticking up and bonds are ticking down.
Gold futures are at $1232, silver futures are at $14.7, and oil futures are $67.16.
S&P 500 resistance levels are 2700, 2740 and 2765; support levels are 2688, 2661 and 2631.
DJIA futures are up 150 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 23% – 33% and short to medium-term hedges of 10% – 15% and short term hedges of 3%.
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