Weak Seasonality Ahead In The Stock Market But Bulls Have A Good Argument

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

Weak Seasonality

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

Note the following:

• The chart shows that the stock market is below the mini resistance zone. The mini resistance zone shown on the chart is a magnet for traders.  
• RSI on the chart shows that after the late August rally, momentum is waning.  
• September is seasonally weak. However, bulls have a good argument – in years when S&P 500 is up more than 10% going into September, September tends to be positive. 
• October is often the most volatile month of the year. Most crashes have occurred in October. 
• In The Arora Report analysis, seasonality is one of the many factors that investors need to consider. The most important factor in September will be market mechanics. As of this writing, market mechanics are positive for the month, but market mechanics can quickly change.  
• Understanding market mechanics can give you an edge. There are several podcasts in Arora Ambassador Club on market mechanics.  
• In addition to seasonality, here are the other important factors:
  • The AI frenzy fever was on the verge of breaking in mid-August, but then it picked up steam again. What happens to the AI frenzy in September will come down to the news.
  • The consumer has been excessively spending, but low to mid income consumers are likely to start running into cash flow issues in the September/October timeframe and may start spending less.  
  • Economic data, especially inflation data, will be very important 
  • The next Fed meeting is scheduled for September 19 and 20. In The Arora Report analysis, what the Fed does will come down to the economic data that is released between now and the Fed meeting.  
• ARM ARM IPO is ahead. ARM IP is licensed by all major smartphone manufacturers, including Apple Inc AAPL. ARM is trying to position itself as an AI company.  NVIDIA Corp NVDA is a licensee of ARM. As a full disclosure, there is a buy signal on ARM in ZYX Buy.  
• 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. 

China

Caixin Services PMI came at 51.8 vs. 53.6 consensus.  

In The Arora Report analysis, based on the recent data, China will likely miss its 5% growth target unless the government starts a major stimulus program. So far, President Xi seems to be reluctant to start a new major stimulus program due to debt issues that are plaguing local governments in China.  

Magnificent Seven Money Flows

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

In the early trade, money flows are negative in SPDR S&P 500 ETF Trust 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

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

For longer-term, please see oil ratings.

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.