King Dollar Getting In The Way Of Momo Stock Gurus, China, And Russia

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

King Dollar

Please click here for a chart of the Invesco DB US Dollar Index Bullish Fund UUP.

Note the following:

• The chart shows when The Arora Report’s Morning Capsule headline read “MOMO GURUS PREDICT DEMISE OF DOLLAR BULL RUN, CHINA DATA TEMPERS ENTHUSIASM FOR STOCKS.”
• Momo gurus were thrilled as the dollar had been falling going into July 17, 2023. On the morning of July 17, 2023, there was a unanimous chorus that the dollar was about to fall out of bed.  We wrote:

The chorus of momo guru predictions that the dollar bull run has ended is picking up steam again.

• Momo gurus are always trying to drive the dollar lower. The reason is that momo gurus’ real job is to run up the stock market in the short term. We previously wrote:

S&P 500 companies derive significant revenue from overseas. When overseas profits are converted into dollars, the profits go up when the dollar is weaker.  For this reason, a weak dollar helps the stock market go up in the short term.

• Momo gurus are not concerned about the long term. In sharp contrast, the mission of The Arora Report is to help members maximize the money they make over their lifetimes.  We previously wrote:

In the long term, a weaker dollar is not good for the U.S. A strong currency is the hallmark of a strong country.

• The chart shows the power of Arora support zones and Arora calls.  
  • The chart shows that the Arora call coincides with the low in the dollar.
  • The chart shows that the Arora support zone worked as intended.  
• The trendline on the chart shows that the dollar has gone straight up since July 17.
• Prudent investors should note that the dollar has gone up during a period in which China and Russia put in the most intense, unprecedented efforts to drive the dollar lower. 
• Russia and China are now fully aligned on the objective of China replacing the U.S. as the world’s number one superpower. China and Russia understand that a big part of the strength of the U.S. is the king dollar. The U.S. military is strong. The best way for China and Russia to dethrone the U.S. is to drive the dollar lower.
• Q2 GDP - Third Estimate came 2.1% vs. 2.1% consensus.
• Initial jobless claims came at 204K vs. 215K consensus. This is very strong data indicating that the jobs picture is staying strong. Initial jobless claims are a leading indicator and carries heavy weight in our adaptive ZYX Asset Allocation Model with inputs in ten categories. In plain English, adaptiveness means that the model changes itself with market conditions.  Please click here to see how this is achieved.  One of the reasons behind The Arora Report’s unrivaled performance in both bull and bear markets is the adaptiveness of the model.  Most models on Wall Street are static. They work for a while and then stop working when market conditions change.
• Stock futures were down earlier this morning, but the momo crowd bought aggressively ahead of the economic data, as is their pattern.
• Stock futures dipped when jobless claims came much better than expected. As of this writing, the momo crowd is aggressively buying the dip.
• There are two important earnings that have an impact on the entire stock market.
  • The large semiconductor company Micron Technology Inc MU guided lower as companies are spending more money on AI chips and not on conventional memory chips.  Micron is working on a high bandwidth memory chip for AI, but it will not be available until 2024. The stock is down 3.8% as of this writing.  We have been sharing with you that a fortune is to be made in artificial intelligence, but it will take expertise.
  • The large used car deal CarMax, Inc KMX reported that comparable store used unit sales fell 9% year-over-year. The stock is down 12.2% as of this writing in the premarket, even though this is one of the stocks that is supposed to benefit if the UAW strike prolongs.
• According to the St. Louis Federal Reserve, credit card delinquency rate in Q2 was 2.8%. For reference, compare it to 2.6% delinquency rate in the Q4 2019 just before the pandemic hit and 6.8% in Q2 2009 during the great financial crisis.
• In The Arora Report analysis, the foregoing credit card data is backward looking. Investors should focus on leading indicators.  Consumers are charging more and getting closer to their credit card limits. This may lead to higher delinquencies in the future. This is an important piece of data since the U.S. economy is about 70% consumer based and the recession has been postponed, in part, due to excessive consumer spending. 
• 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 Meta Platforms Inc META.

In the early trade, money flows are negative in Apple Inc AAPL, Amazon.com, Inc. AMZN, Alphabet Inc Class C GOOG, Microsoft Corp MSFT, NVIDIA Corp NVDA, and Tesla Inc TSLA.

In the early trade, money flows are mixed in SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust Series 1 QQQ.

Momo Crowd And Smart Money In Stocks

The momo crowd is buying stocks in the early trade.  Smart money is 🔒 in the early trade. To see the locked content, please click here to start a free trial.

Gold 

Gold has fallen below $1900 on strong dollar.

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

For longer-term, please see gold and silver ratings.

The most popular ETF for gold is SPDR Gold Trust GLD. The most popular ETF for silver is iShares Silver Trust SLV. 

Oil

The momo crowd is like a yoyo in oil in the early trade after the strong move up yesterday after the EIA data. Please see yesterday’s Afternoon Capsule for details.  Smart money is 🔒 in the early trade.

For longer-term, please see oil ratings.

The most popular ETF for oil is United States Oil ETF USO.

Bitcoin

Bitcoin BTC/USD is range bound.

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.

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 🔒 in cash or Treasury bills 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, the 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.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.  Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

The Arora Report is known for its accurate calls.  The Arora Report correctly called the 2008 financial crash, the start of a mega bull market in 2009, the COVID crash, the post-COVID bull market, and the 2022 bear market.  Please click here to sign up for a free forever Generate Wealth Newsletter.