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The Next Trigger Please click here for a chart of SPDR S&P 500 ETF Trust (ARCA:SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- The chart shows that the stock market has now moved above the top support zone.
- The chart shows that the move down below the top support zone in late October has temporarily proven to be a bear trap.
- RSI on the chart shows that the stock market is overbought. Overbought markets tend to be vulnerable to the downside.
- As we have shared with you before, three macro events triggered a vicious short squeeze in bonds, which in turn, led to an epic rally in stocks.
- In The Arora Report analysis, the first leg of the short squeeze in bonds is now over.
- There is Fed speak from Neel Kashkari and Austin Goolsbee. Powell will be speaking later in the week.
- It is clear from the Fed speak that there is not clarity at the Fed regarding the following:
- The real reason behind the rapid rise in long term rates in October
- Implications now for future Fed policy of long term rates pulling back since Wednesday last week
- In The Arora Report analysis, the stock market is looking for a trigger for the next move.
- On the positive side, Apple Inc (NASDAQ: AAPL) has recovered after a weak earnings report. In The Arora Report analysis, it is important to pay attention to the price action in AAPL because it is an indication of investor sentiment.
- On the earnings front there is positive news in three areas important to the economy.
- Data analytics company Datadog Inc (NASDAQ: DDOG) reported good earnings. This is bringing buying this morning in many stocks that have a positive readthrough from Datadog such as Snowflake Inc (NYSE: SNOW) and Mongodb Inc (NASDAQ: MDB). SNOW and MDB are in the ZYX Buy portfolio that surrounds that core Model Portfolio.
- One of the largest home builders DR Horton Inc (NYSE: DHI) is guiding Q1 revenues above expectations. Home builders continue to benefit from a lack of supply of existing homes because homeowners who have locked in a 3% mortgage do not want to sell.
- Earnings from semiconductor company NXP Semiconductors NV (NASDAQ: NXPI) are inline with expectations. NXPI is a major supplier of semiconductors to the automotive industry. After bad earnings from ON Semiconductor Corp (NASDAQ: ON) and Wolfspeed Inc (NYSE: WOLF), the fear was that NXPI would report bad earnings.
- As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band.
Magnificent Seven Money Flows In the early trade, money flows are positive in Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc Class C (NASDAQ: GOOG), Meta Platforms Inc (NASDAQ: META), and Microsoft Corp (NASDAQ: MSFT).
In the early trade, money flows are negative in Apple Inc (NASDAQ: AAPL), NVIDIA Corp (NASDAQ: NVDA), and Tesla Inc (NASDAQ: TSLA).
In the early trade, money flows are mixed in SPDR S&P 500 ETF Trust and Invesco QQQ Trust Series 1 (NASDAQ: QQQ).
Momo Crowd And Smart Money In Stocks The momo crowd is buying stocks in the early trade. Smart money is