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Bank Of Japan Please click here for a chart of SPDR S&P 500 ETF Trust (ARCA: SPY).
Note the following:
- The chart shows that the stock market traced an outside reversal day. An outside reversal day is a bearish pattern. The last time this pattern occurred was in November 2021, and subsequently the stock market fell about 6.5%.
- This bearish pattern was triggered by a Tweet regarding the Bank of Japan.
- In yesterday’s Afternoon Capsule, we shared with you in advance:
There is a report that tomorrow, Bank of Japan (BoJ) will discuss changes to the yield curve. If BoJ makes a major change, it will have major negative implications for the U.S. stock market.
- When the Fed and ECB raised rates, BoJ kept its monetary policy easy. Finally, BoJ is moving towards the end of the decade-long easy monetary policy. Here is a simplified, easy way to understand what is happening.
- BoJ has decided to allow the yield on 10 year Japanese government bonds to rise up to 1%. Previously, BoJ had capped the yield at 0.5%.
- BoJ left its interest rates unchanged.
- In The Arora Report analysis, BoJ’s policy shift will take place gradually, is negative for the U.S. stock and bond markets due to the carry trade, and presents an opportunity to buy yen and other Japanese assets.
- The Arora Report has given a new signal to buy yen. The signal is in ZYX Allocation. ZYX Allocation also has a buy zone for Japanese stocks.
- After initial volatility on BoJ’s announcement, the momo crowd is aggressively buying stocks on BoJ not raising its rate. The momo crowd is ignoring the band expansion. This is keeping with the recent trend for investors to buy by focusing on the positive news and ignoring the negative news.
- The U.S. economy is about 70% consumer based. Therefore, The Arora Report pays significant attention to the personal income and spending data. The latest data shows that personal income did not rise as much as expected, but consumers splurged by spending more than expected. Here are the details:
- Personal Spending came at 0.5% vs. 0.3% consensus.
- Personal Income came at 0.3% vs. 0.5% consensus.
- The Fed’s favorite inflation gauge PCE came at 0.2% vs. 0.2% consensus.
- The Employment Cost Index came at 1.0% vs. 1.1% consensus.
- Buying is especially aggressive in the magnificent seven stocks. The magnificent seven stocks are Apple Inc (NASDAQ: AAPL), Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc Class C (NASDAQ: GOOG), Meta Platforms Inc (NASDAQ: META), Microsoft Corp (NASDAQ: MSFT), NVIDIA Corp (NASDAQ: NVDA), and Tesla Inc (NASDAQ: TSLA). Money is flowing in Invesco QQQ Trust Series 1 (NASDAQ: QQQ).
- As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.
Europe Inflation expectations among consumers dropped to 4.8 vs. 6.0 prior.
GDP in France grew by 0.5% quarter-over-quarter vs. 0.1% consensus. Consumer Price Index (CPI) in France came at 4.3% year-over-year vs. 4.3% consensus. Month-over-month CPI came at 0.0% vs. 0.2% consensus.
In Germany, GDP came at -0.2% quarter-over-quarter vs. 0.1% consensus.
China The Chinese government is seeking advice from stock brokers on how to run up the stock market.
Momo Crowd And Smart Money In Stocks The momo crowd is aggressively buying stocks in the early trade. Smart money is inactive in the early trade.
Gold The momo crowd is buying gold in the early trade. Smart money is inactive in the early trade.
For longer-term, please see gold and silver ratings.
Oil The momo crowd is buying oil in the early trade. Smart money is inactive in the early trade.
For longer-term, please see oil ratings.
Bitcoin Bitcoin is range bound.
Markets Our very, very short-term early stock market indicator is positive but can quickly turn 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.
Protection Band And What To Do Now It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding