WEEKLY STOCK MARKET DIGEST: FINALLY SOME INVESTORS GETTING CONCERNED ABOUT THE FED, RED HOT HOUSING MARKET COOLS $SPY $DJIA $DIA

WEEKLY STOCK MARKET DIGEST: FINALLY SOME INVESTORS GETTING CONCERNED ABOUT THE FED, RED HOT HOUSING MARKET COOLS $SPY $DJIA $DIA $GDX $XLB $SLV $QQQ

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.

ROTATION, TRUMP TO BAN TIKTOK, QUADRUPLE WITCHING

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

Rotation

Please click here for a chart of S&P 500 ETF (SPY).

Note the following:

  • The chart compares SPY to cloud ETF (WCLD), internet ETF (FDN) and basic materials ETF (XLB).
  • WCLD is full of momo stocks.
  • At the beginning of the month, WCLD was outperforming XLB by about 11% as shown on the chart.
  • What a difference a few days make!  Now XLB has outperformed WCLD by about 8%.
  • WCLD has lost about 17% so far this month.

Trump To Ban TikTok

Trump is banning TikTok and WeChat downloads from U. S. app stores starting Sunday.

It is not clear if this is simply a negotiating tactic that Trump is using or will the ban really go through. Prudent investors should note that there is a heightened risk here that the momo crowd is ignoring.  Risk is especially high to a stock like Apple (AAPL) because of its massive presence in China.  All investors should review their holdings of tech stocks and tech ETFs and make sure they are comfortable with the risks.  Of note is that the momo crowd is buying Apple stock, other tech stocks and tech ETFs on the news.  Apparently the momo crowd has concluded that Trump is just bluffing and if Trump is not bluffing, China will not retaliate.

Quadruple Witching

Today is quadruple witching.  In quadruple witching, stock index futures, futures options, stock options and single stock futures expire.

Quadruple witching may increase volatility.

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial). stocks in the early trade.  Smart money is 🔒.

Gold

The momo crowd is 🔒 gold in the early trade.  Smart money is🔒 .

For longer term, please see gold and silver ratings.

Oil

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

For longer term, please see oil ratings.

Markets

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

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 $1956, silver futures are at $26.97, and oil futures are $41.37.

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

DJIA futures are up 16 points.

Protection Bands and What To Do Now?

It is important for investors to look ahead and not in the rear view mirror.

Consider continuing to hold existing positions. Based on individual risk preference, consider holding 🔒 in cash or treasury bills or short term bond funds or allocated to short term tactical trades and short to medium-term hedges of 🔒 and short term hedges of 🔒.  This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, total cash level should be more than stated above but significantly less than cash plus hedges.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

FINALLY SOME INVESTORS GETTING CONCERNED ABOUT THE FED, RED HOT HOUSING MARKET COOLS

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

Concern About The Fed

Please click here for a chart of S&P 500 ETF (SPY).

Note the following:

  • After yesterday’s ultra dovish stance from Fed, concern is developing among some investors.
  • In the past, the stock market tended to rocket up on dovish Fed.
  • Yesterday’s market reaction was different. Please read yesterday’s Afternoon Capsule. Please click here for the chart showing that VUD indicator stayed mostly orange.
  • This morning the futures are down again.  The chart shows that the opening this morning is likely to be under the breakout line.
  • RSI has touched the oversold level.  Last time RSI came close to the oversold level in June the market took off to the upside.
  • This time has a significantly higher probability of being different from what happened in June.

Jobless Claims

Initial Jobless Claims came at 860K vs. 830K consensus.

Red Hot Housing Cooling 

This is the first time in awhile that there is data indicating that the red hot housing market may cool.

Housing Starts came at 1.416M vs. 1.48M consensus.

Building Permits came at 1.47M vs. 1.52M consensus.

Momo Crowd And Smart Money In Stocks

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

Gold

The momo crowd is 🔒 gold and silver in the early trade.  Smart money is🔒 .

For longer term, please see gold and silver ratings.

Oil

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

For longer term, please see oil ratings.

Markets

Our very, very short-term early stock market indicator is 🔒.  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 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 $1949, silver futures are at $26.93, and oil futures are $39.85.

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

DJIA futures are down 357 points.

EXCITEMENT OVER VACCINE IN FOUR WEEKS, DOVISH FED AND SNOWFLAKE

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

The Fed

Please click here for a chart to see massive expansion of the Fed’s balance sheet. In plain English, the Fed’s balance sheet is a fancy way of saying money printing.

The Fed has been meeting since yesterday.  The Fed will announce its rate decision at 2:00 pm ET.

The momo crowd is excited in anticipation of the Fed being dovish, keeping rates lower for longer and more money printing.

Vaccine In Four Weeks

The momo crowd is excited about a claim  from President Trump that  a vaccine may be ready in four weeks.

An important observation is that in the premarket, stocks that benefit from vaccine are running but the stocks that are hurt by the vaccine are also running.  Nobody ever said that momo crowd was discriminating.

Snowflake

We do not talk about individual stocks in the Morning Capsule unless it impacts the entire market.  Snowflake (SNOW) is a new IPO in the business of cloud based data warehousing that will start trading shortly.  Berkshire Hathaway, normally a conservative astute investor is creating a big part of the excitement. Berkshire is investing heavily in the IPO. The last time Berkshire invested in an IPO was in 1956 in Ford Motor Company (F ).  The SEC form is not signed by Warren Buffett but by one of his lieutenants.

Investors should note that finally Berkshire Hathaway, after being bearish, appears to have thrown in the towel.  SNOW was expected to be priced in the range of $75 to $85 per share.  From a valuation perspective, even at that price, the stock would have been extremely expensive.  Now due to the excitement, the stock is coming public at $120 per share and expected to run up even higher. The inference here is that it is all about momentum and sentiment — valuation does not matter any more in this market. Investors who have studied history will recognize that the market is entering an even more dangerous phase.

Retail Sales

August Retail Sales came at 0.6% vs. 1.0% consensus.

Retail Sales Ex-auto came at 0.7% vs. 1.0% consensus.

One of the major arguments behind the bullish view has been that retail sales have been very strong.  We have previously argued that retail sales were strong due to pend up demand and they would slow. That call is now proving spot on.

This data is bearish but in this market bad news is good news.

Momo Crowd And Smart Money In Stocks

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

Gold

The momo crowd historically 🔒 gold ahead of the Fed decision.  Today is no exception. Smart money is 🔒.

For longer term, please see gold and silver ratings.

Oil

API showed an inventory draw of 9.517M barrels vs. consensus of 1.27M barrels.  This data is bullish.

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

For longer term, please see oil ratings.

Markets

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

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 $1976, silver futures are at $27.52, and oil futures are $39.04.

S&P 500 futures resistance levels are 3460, 3520 and 3600: support levels are 3420, 3390 and 3320.

DJIA futures are up 99 points.

MYOPIC INVESTORS CELEBRATE CHINA’S YUAN SURGE AGAINST THE DOLLAR

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

Yuan Surges

Please click here for a chart of U. S. dollar against Chinese yuan.

Note the following:

  • The chart shows a down sloping trendline.
  • The trendline shows that the dollar had been progressively and slowly becoming weaker against Chinese currency yuan.
  • The last big red candle on the right hand side of the chart shows a surge in Chinese yuan against the dollar.
  • The price action has now moved farther away from the down sloping trendline.
  • The latest surge in yuan came after strong economic data in China.

Economic Data

China’s industrial production increased by 5.6% year over year vs. consensus of 5.1%. This is a very strong number.

Retail Sales in China increased by 0.5% vs. consensus of 0.0%.  This indicates that the Chinese consumer is back.

Myopia In The U. S.

Myopia has taken hold in the U. S.  History tells us that a strong currency is the hallmark of a strong nation.  There was a time when the dollar was known as ‘King’ dollar because of a strong U. S. economy.

The U. S. is now in competition with China.  In stead of making the U. S. dollar stronger, our leaders are doing everything they can to make the U. S. dollar weaker. The reason our leaders are doing this is because it is beneficial to U. S. company’s earnings in the short term and drives up the stock market in the short term.

Irrespective of the short term moves in gold, this is a good reason to hold some gold in your portfolio for the very long term. Please click on gold from the top menu and see the recommended allocation.

Industrial Production

Industrial Production came at 0.4% vs. 1.0% consensus.  This is a weak number and the stock market should have reacted negatively to it but the momo crowd is oblivious.

Momo Crowd And Smart Money In Stocks

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

Gold

There is  🔒 gold due to the weaker dollar.

The momo crowd is 🔒 gold in the early trade.  Smart money is🔒 .

For longer term, please see gold and silver ratings.

Oil

Strong economic data from China is creating enthusiasm in oil.

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

For longer term, please see oil ratings.

Markets

Our very, very short-term early stock market indicator is🔒 .  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 $1974, silver futures are at $27.58, and oil futures are $37.55.

S&P 500 futures resistance levels are 3420, 3460 and 3520: support levels are 3390, 3320 and 3278.

DJIA futures are up 217 points.

OPTIMISM OVER DEALS AND VACCINE PROGRESS

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

Optimism

Buying started in Asia and has continued to the U. S. There is significant optimism over vaccine progress by PFE and BNTX.

Three deals are creating more optimism.

  • SFTBY is selling ARM Holdings to NVDA.
  • GILD is buying IMMU to get ahold of promising oncology therapies.
  • ORCL is declared the winner to buy TikTok. However it appears to be a complex deal without many details.

The Chart

Please click here for a chart of S&P 500 ETF (SPY).

Note the following:

  • On the surface, the rally in the premarket looks very impressive.
  • The chart shows that the rally, if sustained, simply returns SPY to the breakout point.
  • Even after the rally, there is still a long way to go to again break the trendline shown on the chart to the upside.
  • In spite of the rally, the market remains at an inflection point and there is no resolution at this time to the up or down side.

Momo Crowd And Smart Money In Stocks

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

Gold

The momo crowd is 🔒 gold in the early trade.  Smart money is 🔒.

The momo crowd is 🔒 silver in the early trade. Smart money is🔒  in silver.

For longer term, please see gold and silver ratings.

Oil

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

For longer term, please see oil ratings.

Markets

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

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 $1964, silver futures are at $27.27 and oil futures are $36.18.

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

DJIA futures are up 226 points.

 

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