WEEKLY STOCK MARKET DIGEST: HERE IS WHAT PRUDENT INVESTORS NEED TO KNOW ABOUT SMART MONEY ACTIONS ON TRUMP ILLNESS AND WEAK JOBS DATA

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.

MOMO BUYS BUT SMART MONEY SELLS TRUMP TESTING POSITIVE, WEAKER DATA

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

Trump Tests Positive

President Trump has tested positive for coronavirus. Our best wishes to President Trump and First Lady for a speedy recovery.

What does it mean for the stock market? Let’s explore with the help of a chart.

Please click here for a chart of S&P 500 ETF (SPY) that represents the benchmark stock market index S&P 500 (SPX).

Note the following:

  • President Trump has mild symptoms.
  • Will the White House be truthful on an ongoing basis about Trump’s health?
  • Vice President Pence and Treasury Secretary Mnuchin have tested negative.
  • Vice President Biden was in close quarters with President Trump during the debate, Biden status is not known as of this writing.
  • The hope of most Americans is that this will bring the country together, Trump will recover quickly and in the end it will be positive for the country. If this happens it will be a positive for the stock market.
  • There is speculation that Democrats and Republicans are now more likely to pass the stimulus bill.  If this occurs, this will be positive for the stock market.
  • Will it help Biden or Trump in the election?  The prevailing wisdom at this time is that it will help Biden. However, there may be a sympathy vote for Trump that nobody is expecting.
  • How will this impact Supreme Court nomination hearings? Trump’s base is highly energized about this issue.  A section of Democratic base is also energized but overall energy on this issue is on Trump’s side.
  • An influential Chinese media outlet with close ties to the communist party is gloating over Trump catching coronavirus.   Nobody is talking about it but prudent investors should be concerned about the international impact if Trump does not recover quickly.
  • The chart shows that the reaction to Trump testing positive is mild as of this writing. The reason that the reaction is not severe is that the momo crowd is aggressively buying the slight dip.
  • If the stock market goes down from here, it will be a failure at the breakout line shown on the chart.  In traditional technical analysis, such a failure will be considered very negative for the stock market.
  • After rallying, RSI is turning negative.  This is a negative in the very short term.
  • The latest data shows that the economy is weakening.  Weak data coming at a time when Trump tests positive is negative for the stock market. However, the bulls will argue that it is positive because it will lead to more borrowing and more money printing.
  • Under these circumstances, investors should pay special attention to ‘Protection Bands and What To Do Now?’

Weak Data

The main stream call has been that the economy will continue to strengthen.  The Arora Report call has been that the strength in the economy so far, in  part, is due to pent up demand and as pent up demand gets satisfied, a period of weakness in the economy is ahead.   So far, The Arora Report call has proven spot on.  Today’s jobs report is weaker than expected.

Non-farm Payrolls came at 661K vs. 800K consensus.  However it appears to be mostly the loss of government jobs.  Non-farm Private Payrolls came at 877K vs. 814K consensus.

Momo Crowd And Smart Money In Stocks

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

Here is the key difference between the momo crowd and smart money that investors need to understand — smart money always gives first priority to protecting their capital, the momo crowd is usually too busy chasing the momentum and not thoughtful about protecting their capital.

Gold

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

Investors need to understand that for the most part the gold crowd is different from the stock market crowd.

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 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 $ 1908, silver futures are at $24.00, and oil futures are $36.73.

S&P 500 futures resistance levels are 3320, 3390 and 3420: support levels are 3278, 3228 and 3182.

DJIA futures are down 477 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.

FRONT RUNNING NEW QUARTER MONEY AND MORE BORROWING, AMERICANS SPEND

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

Front Running

Please click here for a chart of  the national debt as a percentage of GDP.

Note the following:

  • The chart shows the national debt as a percentage of GDP.
  • There is optimism that Democrats and Republicans will reach a compromise to borrow more and pass another stimulus package.
  • Optimism is developing that irrespective of who wins the election, they will continue to borrow more. Some of the borrowing will filter into the stock market.
  • Today is the first day of the quarter.  The blind money will pour into Wall Street today and tomorrow.  Traders are front running by buying ahead of it.

Jobless Claims

Jobless Claims came at 837K vs. 850K consensus.  This is a leading indicator.

Americans Spend

The U. S. economy is about 70% consumer based. Therefore we pay a lot of attention to personal spending and personal income.

Personal Spending came at +1.0% vs. +0.6% consensus.  This is a considerable increase in spending by Americans.  Are they spending more because their income is going up?  Previously their income was going up because of government heavily borrowing and freely handing out money. Now the government programs have expired.

Personal income went down.  Personal income came at -2.7% vs. -2.0% 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 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  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 $1909, silver futures are at $23.73, and oil futures are $39.07.

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

DJIA futures are up 146 points.

DEBATE DISAPPOINTS — QUARTER END CROSS CURRENTS

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

Debate Disappoints 

Please click here for a chart of Nasdaq 100 ETF (QQQ).

Note the following:

  • Today is the end of the quarter.  The stock market always has cross currents but the end of a quarter brings more cross currents. For newer investors and those investors who are working towards sophistication, it is extremely important to understand that there are always positive factors and negative factors — investors need to take both into account. Many newer investors make the mistake of either focusing only on one side that confirms their opinion or worse believing that any analysis that takes a comprehensive look at both sides is flawed.
  • The presidential debate was chaotic.
  • Wall Street is disappointed as Wall Street was hoping for a clear Trump win.
  • VUD indicator is the most sensitive measure of net supply demand in real time.  Orange indicates net supply, green indicates net demand.
  • The chart shows that earlier in the morning the price dipped but the dip was bought as the VUD indicator stayed solid green.
  • As the morning has progressed, VUD indicator has stayed solid green leading to recovery of the price as shown on the chart.
  • Due to the quarter end, there is buying in momo stocks by portfolio managers who want to show their clients that they own momo stocks.
  • Due to the weakness in the dollar, in rebalancing, there is likely to be buying by foreign money managers.
  • There is optimism that Pelosi and Mnuchin may strike a stimulus deal today. This is leading to buying in early trade. However as the day progresses the  market may sell off if there is no stimulus deal or there are negative rumors about the stimulus deal.
  • As the day progresses, disappointment may set in regarding the debate leading to some selling.
  • Economic data coming in today is strong and may encourage buying.

ADP Data

ADP is the largest private payroll processor in the country. ADP uses its data to give an advanced glimpse of the employment picture ahead of the official jobs report that will be released on Friday at 8:30 am ET.

ADP came at 749K vs. 600K consensus.  This is strong data. However keep in mind that this is a lagging indicator.  At The Arora Report our research has shown that it makes sense for investors to pay attention mostly to leading indicators.

GDP

GDP Deflator-Third Estimate came at -1.8% vs. -2.0% consensus.

Chicago PMI Surges

Chicago PMI (Purchasing Managers Index) came at 62.4% vs. 53.0% consensus.

Momo Crowd And Smart Money In Stocks

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

Gold

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

For longer term, please see gold and silver ratings.

Oil

API data showed a draw in crude inventories of 831K barrels vs. consensus of a draw of 2.3M barrels. However this bullish data was offset by bearish data on gasoline.

The momo crowd is 🔒 in 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 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 $1901, silver futures are at $24.09, and oil futures are $39.47.

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

DJIA futures are down 10 points.

A BULLISH ISLAND REVERSAL, DEBATE AND THE STOCK MARKET, GRIM MILESTONE

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

Island Reversal

Please click here for a chart of Dow Jones Industrial Average ETF (DIA).

Note the following:

  • The chart shows the formation of an island.
  • The island formation shown on the chart is considered bullish in traditional technical analysis.
  • This island formation was due to short squeeze. Please click here for a chart regarding short squeeze that we previously provided.
  • Since the island shown on the chart was formed due to a short squeeze, investors should consider this formation suspect.

Presidential Debate

Tonight is the first presidential debate. To  make money in the markets, investors should consider separating their politics from making money. The objective is to make money irrespective of who wins — Republicans or Democrats.

We are politically agnostic.  Our sole job is to help investors.

Make no mistake, Wall Street loves Trump. The Wall Street consensus is that Trump will do better than Biden in the debate.  If Biden does better than expected, there may be some selling in the market but the stocks that benefit from a Democrat victory may do better.  These stocks include electric vehicle stocks, solar power stocks, infrastructure stocks and health insurance stocks.  On the other hand if Trump wins the debate, expect some selling in the sectors that Democrats favor.

Grim Milestone

Now there are over one million officially reported deaths in the world from coronavirus.  Experts think that the real number is over two million deaths.  The stock markets across the world did not even blink an eye reaching this grim milestone.  Why the disconnect?  The stock market is not driven by empathy or concern for human beings. These days the stock market is driven by money printing and excessive borrowing.  The market is controlled by the momo crowd that does not care about anything other than momentum.

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 🔒.

For longer term, please see gold and silver ratings.

Oil

The momo crowd is 🔒 in 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 $1888, silver futures are at $23.94, and oil futures are $39.94.

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

DJIA futures are down 38 points.

FUNDAMENTALS WEAKEN BUT SHORT SQUEEZE TAKES HOLD

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

Fundamentals Weaken

At The Arora Report, we monitor economic indicators from 23 countries. Our call has been that the strength seen in the economic indicators, was in part, due to pent up demand. Our call has been that once the pent up demand was satisfied, fundamentals would start to weaken. So far this call is proving spot on. Fundamentals are beginning to weaken across the globe.

Short Squeeze Takes Hold

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

Note the following:

  • In Friday’s Morning Capsule we wrote:

    …it is Friday and short squeezes are common on Fridays. If a short squeeze occurs, there is potential for a rally.

  • Due to the importance of this short squeeze, we repeated it in the Afternoon Capsule.
  • The short squeeze caused the momentum to reverse to the upside.  As the momentum reversed, the momo crowd buying became more aggressive.
  • The momo crowd buying this morning is extremely aggressive.
  • The breakout line shown on the chart is at $339.70.  As of this writing, SPY is trading at $333.38.
  • As the market approaches the breakout line, it should start experiencing some resistance.
  • If the strength continues, RSI shown on the chart will give a technical buy signal.

The Key Question

Here is the key questions for investors, “In view of the weakening fundamentals, political uncertainty and the potential second virus wave, will the momo crowd succeed in pushing the stock market decisively above the breakout line shown on the chart?”

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 🔒.

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 and bonds are range bound.

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 $1871, silver futures are at $23.16, and oil futures are $40.71.

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

DJIA futures are up 380 points.

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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