WEEKLY STOCK MARKET DIGEST: SMART MONEY NAILED TECH STOCK SELLING — THE ARORA REPORT GAVE YOU SMART MONEY FLOWS AHEAD OF TIME $DJIA $SPX $QQQ $GLD $SLV $USO

WEEKLY STOCK MARKET DIGEST: SMART MONEY NAILED TECH STOCK SELLING — THE ARORA REPORT GAVE YOU SMART MONEY FLOWS AHEAD OF TIME $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.

TRENDLINE INTACT AFTER TECH BLOODBATH, GOOD JOBS REPORT, WATCH FOR MARGIN CALLS

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

Trend Intact

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

Note the following:

  • The chart shows the trendline that has been in place since July.
  • So far the trendline has not broken on a closing basis.
  • Until the trendline breaks on a closing basis, the trend is presumed to be intact.
  • RSI shows that the overbought condition has been relieved.
  • So far the pattern of RSI shows that the stock market can go either way.
  • The volume was higher during the dip compared to the up days.  In traditional technical analysis, this is negative. However notice from the chart that lately volume has been higher on down days but the market still has continued to go up.
  • Nasdaq 100 (NDX) represented by ETF (QQQ) has behaved differently because it contains mostly momo stocks.

Jobs Report

Not long ago, the consensus among economists was that the unemployment rate would not fall below 10% for a long time.  July Unemployment Rate came at 8.4% vs. 9.8% consensus.

Non-farm Private Payrolls came at 1.027M vs. 1.335M.  This number is not encouraging.

As of this writing, the stock market is reacting positively to this number.

Margin Calls

If the momo crowds’ favorite stocks do not recover, watch for margin calls later in the day that could force more selling in the momo stocks.

Momo Crowd And Smart Money In Stocks

The momo crowd is buying stocks in the early trade.  The momo crowd buying accelerated after the release of the jobs report.  Smart money is inactive.

Gold

There is disappointment in precious metal markets over the good jobs report.

The momo is selling gold in the early trade. Smart money is inactive.

For longer term, please see gold and silver ratings.

Oil

The momo crowd is selling 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 turn negative based on potential margin calls.  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 $1933, silver futures are at $26.82, and oil futures are $41.26.

S&P 500 futures resistance levels are 3520, 3600 and 3630: support levels are 3420, 3390 and 3320.

DJIA futures are up 152 points.

FEDERAL DEBT TO SMASH WORLD WAR II RECORD — SMART MONEY SELLS STOCKS BUT MOMO BUYS

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

National Debt

Please click here for a chart of the federal debt compared to Gross Domestic Product (GDP).

The Congressional Budget Office said that the national debt is now on track to smash World War II record. This is a great reason for the momo crowd to celebrate — they believe the higher the debt the higher the stock market.

‘Lies, damned lies, and statistics’ applies here when counting on funded liabilities.  The debt is much greater.

Jobless Claims

The momo crowd is excited about the new jobless claims data.  They bought on the news.

Weekly Jobless Claims came at 881K vs. 915K consensus.

Vaccine

CDC says that a vaccine will be available by November 1.  Can you figure out why the vaccine availability date must be before November 3rd? This is creating additional excitement to buy stocks.

Momo Crowd And Smart Money In Stocks

The momo  crowd is buying stocks in the early trade.  Smart money is selling stocks in the early trade. Smart money is especially selling momo crowds’ favorite stocks.

Gold

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

For longer term, please see gold and silver ratings.

Oil

The momo crowd is selling 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 $1939, silver futures are at $27.44, and oil futures are $40.58.

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

DJIA futures are down 23 points.

1999 TYPE BEHAVIOR IS ACCELERATING

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

1999 Type Behavior 

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

Note the following:

  • The trendline starting in April held the lows.
  • In August, QQQ started accelerating away from the longer term trendline as shown by the short term trendline on the chart.
  • Today’s premarket move, if it holds, shows acceleration even from the higher sloping new short term trendline.
  • All of this is happening while RSI as shown on the chart is very overbought.
  • This is exactly what was happening in 1999.

ADP Data

ADP is the largest payroll processor in the country.  It uses its data to give a picture of employment ahead of the official jobs report which will be released on Friday.

ADP employment change came at 428K vs. 1.21M consensus.  This data is a lot weaker than expected. However, the market is totally dismissing it.  Investors will have to carefully watch the data on Friday.

Momo Crowd And Smart Money In Stocks

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

Gold

Money is moving out of gold into stocks. Who needs the safety of gold?

The momo crowd is aggressively selling 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 neutral but expect the market to open much 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 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 $1966, silver futures are at $27.91 , and oil futures are $42.86 .

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

DJIA futures are up 124 points.

DOLLAR UNDER PRESSURE — MAY GIVE AN OPENING FOR CHINA AND RUSSIA TO CHALLENGE THE RESERVE CURRENCY STATUS

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

Reserve Currency

Many investors do not realize that a big part of the prosperity in the United States and the current stock market rise is attributable to the reserve currency status of the dollar. Without the reserve currency status, the Fed would have had difficulty printing the  money it has and the government would have had difficulty borrowing as much as it has. Money printing and borrowing are the main forces behind the stock market rise.

The dollar is coming under renewed pressure. China and Russia have long wanted to nullify the dollar as the reserve currency. The renewed weakness in the dollar and our myopic leadership in both parties is giving China and Russia a new opening.

The Chart

Please click here for a chart of Apple (AAPL) stock.

Note the following:

  • In general we do not discuss individual stocks in the Morning Capsule unless they have a major impact on the market.
  • Apple is the largest stock and carries  heavy weight in the indexes.
  • Note the area encased by a rectangle on the chart.
  • In the rectangle area, in spite of the massive rise in the stock there has been no smart money buying.
  • As the stock has marched higher in the rectangle shown on the chart, there has been no fundamental development or new value creation.
  • The move is solely driven by the momo crowd (momentum) based on the excitement about the split. It is worth repeating that the split adds no economic value.

Momo Crowd And Smart Money In Stocks

Earlier this morning, the momo crowd buying became very aggressive especially in their favorite stocks like Tesla (TSLA). Then came the news that TSLA may sell up to $5 billion worth of stock.  Smart money immediately started selling not only TSLA but the indexes and momo crowds’ favorite stocks.  Clearly smart money believes that the up move is overdone.

The momo crowd is buying in the early trade. Smart money is lightly selling into the strength.

Gold

Gold is priced in dollars.  As the dollar slumps, the price of gold goes up without any new net buying.

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

Buying is very aggressive in silver and miners in the early trade.

Smart money is inactive in silver but is lightly buying miners.

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 attempt to run 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 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 $1999, silver futures are at $29.11, and oil futures are $43.02.

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

DJIA futures are down 139 points.

STOCK MARKET LOVES THE FED BUT BONDS ARE HAVING SECOND THOUGHTS, CHINA EXPANSION

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

Bonds Having Second Thoughts

Please click here for a chart of long bond ETF (TLT).

Note the following:

  • Historically, bond analysts tend to be more rational than stock analysts.
  • The bond market has significantly less influence from the momo crowd compared to the stock market.  For this reason, specifically at this time, it is important to pay attention to the bond market.
  • Unlike prior times, all signals from the bond market are suspect due to manipulation by the Fed.
  • The chart shows that due to the Fed’s policies after the coronavirus, the bond market ran up just like the stock market.
  • The chart shows that the bond market has lately been falling as the stock market has been rising.
  • The pattern shown on the chart is a negative pattern.
  • A negative pattern was also seen in the bond market in May and June as shown on the chart but subsequently the bond market ran up again.
  • Take  a close look at the chart. Investors should watch for a double top in the bond market. A double top is a negative pattern.
  • Initially, nothing is going to stop the momo crowd other than a drop in the stock market itself, the momo crowd suffering losses and perhaps stop mindless buying. However, from a macro perspective, if the bond market does trace a double top and falls,  stock market rallies will become an uphill battle.

China Expansion

The Chinese economy is now showing six consecutive months of expansion.  A PMI greater than 50 is considered expansion.

China’s August Manufacturing PMI came at 51 vs. consensus of 51.2.

China’s Non-Manufacturing PMI came at 55.2 vs. consensus of 55.

Japan

Last week Shinzo Abe, Japan’s popular prime minister, resigned due to health reasons.  Four men have entered the race to succeed him.  Keep a close eye in case an opportunity arises.

Warren Buffett has just made a big investment in four Japanese trading companies.  These companies are on our radar.  The difficulty is that many of our subscribers do not have access to buy them.

Apple And Tesla

 and  are trading post split today.

 and  have scored major gains since the split announcements.  Splits are not an economic event and do not change the value of the company in any way.  A five for one split is like exchanging a $5 bill for five $1 bills.  The big runup in these two stocks after the split announcement indicates mindless buying by the momo crowd without any deep analysis.  The foregoing is not a commentary about the merits of AAPL and  but a commentary on the momo crowd. 

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.

Silver buying by the momo crowd is especially aggressive in the early trade.  Smart money is inactive in 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 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 down and interest rates 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 $28.26, and oil futures are $43.24.

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

DJIA futures are down 31 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%.

 

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