WEEKLY STOCK MARKET DIGEST: PAY ATTENTION AS THE ROSE COLORED GLASSES OF STOCK MARKET BULLS GET ROSIER AHEAD OF THE ELECTION

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.

ROSE COLORED GLASSES GET ROSIER, PMI, FACEBOOK ANTITRUST CASE

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

Rose Colored Glasses Get Rosier

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

Note the following:

  • The chart shows that there is bullishness after the last debate.
  • There is also bullishness on stimulus hopes.
  • The chart shows that the market is consolidating above the breakout line.  From a traditional technical analysis perspective, this is considered bullish.
  • The chart shows that RSI is touching the oversold level.   This is a normal behavior in consolidation and is considered bullish.
  • Based on the data we are seeing, Republicans think Trump won the debate and Democrats think Biden won the debate.
  • Those who are doing independent analysis are claiming that the stock market will go up no matter who wins.
  • There are several hurdles posed by Senate Republicans to Pelosi and Trump coming together to borrow heavily.  However, the market has now shifted the goal post  — stimulus will be there, if not now, then after the election.  That is a good enough theory for the momo crowd and Wall Street to buy.
  • Prudent investors need to stay cautious as rose colored glasses become rosier.

PMIs

Purchasing Managers Index (PMI) is a leading indicator.

Markit Composite PMI for the Eurozone fell to 49.4.  A drop below 50 indicates economic contraction.

Japan’s Manufacturing PMI came at 48.0, below the all-important 50 level.

PMI for the U. S. will be released at 9:45 am ET.

Facebook Antitrust

The FTC is getting close to filing an antitrust suit against Facebook (FB).  There may be a buy the news reaction just like in Google (GOOG).

Short Squeeze

If the market does not pull back, there is a high probability of a short squeeze. This is common behavior on Fridays.

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 🔒 in gold 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 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 $1910, silver futures are at $24.85, and oil futures are $40.76.

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

DJIA futures are up 74 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.

JOB PICTURE IMPROVES, WAITING FOR DEBATE AS THE RACE TIGHTENS

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

Jobless Claims

Please click here for a chart of initial jobless claims.

Note the following:

  • Initial Jobless claims is a leading indicator and carries heavy weight in our models.
  • Initial Jobless Claims came at 787K vs. 860K consensus as shown on the chart.  This is a big drop
  • In a normal market, the stock market should have had a positive reaction to better than expected jobs picture.
  • This market is addicted to money printing and borrowing.  The momo crowd does not like strong economic numbers because such numbers increase the opposition to more borrowing and money printing.
  • The chart shows that jobless claims have significantly declined since the start of the pandemic but still remain above pre-pandemic levels.

Race Tightens

The presidential race is tightening.  Investors should ignore national polls as the president is not elected by majority vote but by the Electoral College.  The data shows the swing states are closer than the national polls and the race is tightening.  The market is waiting for tonight’s debate.

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 🔒. The market will move based on rumors and news about the stimulus. 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 $1906, silver futures are at $24.82, and oil futures are $40.06.

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

DJIA futures are down 46 points.

PAY ATTENTION TO WALL STREET POSITIONING AHEAD OF THE ELECTION

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

Wall Street Positioning

Please click here for a chart of 10-year Treasury bond ETF (IEF).

Note the following:

  • Sophisticated investors know that paying attention to Wall Street’s position ahead of the election is the second most important thing to do. Of course the most important is the actual election results.
  • The move in the markets after the election will be determined not by the election results but by the difference between Wall Street’s positioning and the election results. For example, in 2016 Wall Street was positioned for a Clinton win.  This is one of the reasons that the stock market took off when Trump won. This was a big part of the logic behind The Arora Report giving a buy signal on Trump’s win at a time when most analysts were calling for a disaster in the stock market.
  • Investors can get one important clue by watching money flows and price action in 10-year Treasury bond futures. Since many investors are not comfortable with futures, an easy alternative is to watch the price action in ETF IEF.
  • The chart shows that IEF is breaking down.  IEF moves inverse to the yield.  In plain English, it means that interest rates in the 10-year time frame are beginning to rise but they are not rising a lot.
  • Right now Wall Street is positioned for a Biden win and Republicans continuing to keep the majority in the Senate.
  • Wall Street positioning is one reason that the stock market is continuing to hold up.
  • If Republicans hold on to the majority of the Senate, much of the Biden agenda will not be implemented.
  • The foregoing explains why the market is not seeing selling on the prospects of a Biden win.

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

API reported a crude build of 584k barrels vs. consensus of a draw of 240K barrels. This data is bearish.

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 $1926, silver futures are at $25.23, and oil futures are $41.03.

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

DJIA futures are up 5 points.

ANTITRUST LAWSUIT AGAINST GOOGLE — HERE IS HOW INVESTORS SHOULD PLAN

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

Google Antitrust Case

The U. S. Justice Department is filing an antitrust lawsuit against Google (GOOG). Let’s explore the key points with the help of a chart.

Please click here for a chart of Google stock.

Note the following:

  • The chart compares Google stock with S&P 500 ETF (SPY), Facebook (FB) stock, Amazon (AMZN) stock and Apple (AAPL) stock.
  • The lawsuit appears to be focused on search.
  • Google controls 90% of the search market in the United States.
  • Google has a much larger share of search on mobile.  Google pays about $8 billion a year to Apple to be the search default. Of course, Google is the default search on Android.
  • Google also has dominance in technology for online advertising.
  • This was expected and in theory, should have already been discounted in the price.
  • An antitrust suit against Facebook may also be filed in the future.
  • Amazon (AMZN) and Apple (AAPL) also have antitrust risk.
  • Out of an abundance of caution, buy zones and Buy Now ratings are being temporarily suspended for GOOG and FB.
  • For the time being, buy zones and Buy Now ratings remain valid for AMZN and AAPL but at the risk of being suspended in the future.

The Plan

The sum of the parts of all of GOOG and FB may turn out to be higher than where the companies are trading.  However, if these companies are not broken up but become severely restricted in how they are allowed to operate, the stock of these two companies may be adversely affected.

In the case of Apple and Amazon, the sum of the parts may be less than where the stocks are presently trading.  However, the government seems to be less concerned about Apple and Amazon at this time.

For details of What To Do Now on Google, Facebook, Amazon and Apple, there will be a separate post on ZYX Buy.

Regarding the internet ETF , there will be a separate post on ZYX Global.

Housing

The housing market is hot.  Housing Starts came at 1.415 M vs. 1.43 M consensus.

Housing Permits came at 1.553 M vs. 1.51 M consensus.  Housing permits are a leading indicator — the data is very positive.

Stimulus Hopes

There is optimism that both sides will reach a stimulus deal.

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 $1903, silver futures are at $24.68, and oil futures are $40.58.

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

DJIA futures are up 114 points.

TECH STOCK BUBBLE, CHINA COMEBACK

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

Tech Stock Bubble Bigger Than Dot-Com

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

Note the following:

  • In 1999, when I used the word ‘bubble’ for tech stocks and called for short selling them, Wall Street was highly bullish on tech stocks.
  • In 2000, tech stocks crashed. Many favorites went to zero. Some blue chips lost 90% of their value.
  • In 1999, tech stocks reached a record 37% of the S&P 500.
  • Now, tech stocks have reached 40% of the S&P 500. This time, the tech companies have better earnings, better revenues and better balance sheets compared to 1999. However, valuations have simply gotten out of hand.
  • Investors need to remember that Wall Street and analysts always find ways to justify the valuations.
  • Retail investors often fail to make a distinction between good companies and their stocks.  Prudent investors need to remember that the company being good or bad and its stock valuation are two different things.
  • The chart shows that RSI is now on a buy signal for the short term.
  • The price is comfortably above the breakout line.
  • The old high is still acting like a magnet for the traders.
  • Buying this morning is based on the hope of a stimulus deal.  Pelosi has set a deadline.  Since Pelosi and Trump both want heavy borrowing and giving free money to those who do not need it, the hope is that Pelosi and Trump will reach an agreement.  Some Republican Senators want to spoil the party as they do not see the need for a big package. Again the market is hopeful that Trump will be able to twist the arms of enough Republican Senators to pass a large bill with the help of Democrats.

China Comeback

Recovery in China is gaining momentum.  GDP came at 4.9% vs. consensus of 5.2%.  Even though GDP grew less than the consensus, it is a very strong number.  This is creating optimism for equities and commodities across the globe.

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 $1914, silver futures are at $24.82, and oil futures are $40.94.

S&P 500 futures resistance levels are 3520, 3600 and 3630: support levels are 3460, 3420 and 3390.

DJIA futures are up 153 points.

 

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