Major Buying Opportunity In The Stock Market Ahead Only If This Market Mechanic Kicks To The Upside

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

Major Buying Opportunity Ahead

Please click here for a chart of iShares 20 Plus Year Treasury Bond ETF TLT.

Note the following:

• The chart shows that The Arora Report call that was made on August 2 was very timely and spot on.
• The chart shows the dramatic drop in TLT.
• The chart shows that the volume on the drop yesterday was a record. In The Arora Report analysis, this is one indication of potential capitulation. In general, it pays to buy when a capitulation occurs. However, this is only one of the several important capitulation indicators. For those wanting next-level information, listen to the podcast in Arora Ambassador Club titled “The Ten Secrets Of Epic Capitulation Riches.”
• RSI on the chart shows that TLT is oversold and beginning to bounce. This indicates that if the macro data is favorable, TLT can move up quickly.
• In The Arora Report analysis, the short interest in bonds right now is likely the highest ever. Assuming our analysis is correct, if favorable macro data is released, TLT can experience a major short squeeze and run up.  
• In The Arora Report analysis, all of the foregoing is only short term. For the long term, The Arora Report has a negative view of bonds due to high debt levels, high deficits, and persistent inflation. 
• Weak Automatic Data Processing Inc ADP data this morning is lifting bonds, and in turn, stocks. ADP is the largest private payroll processor in the country. It uses its data to give a glimpse of the jobs picture ahead of the official jobs report that will be released on Friday.  ADP employment change came at 89K vs. 150K consensus.
• There are three pieces of data ahead that can dramatically move TLT, and in turn, the stock market.
  • ISM Non-Manufacturing Index will be released today at 10am ET. The consensus is 53.7.
  • Initial claims will be released at 8:30am ET on October 5. The consensus is 225K. Initial claims is 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.
  • The jobs report will be released at 8:30am ET on October 6. The consensus for non-farm private payrolls is 150K. The consensus for the headline is 158K.
• If the economic data is such that the bonds turn up, the market mechanic of year end chase will start kicking in. If this market mechanic turns out to be to the upside, expect a major rally and a buying opportunity in the stock market. There are never any guarantees. For this reason, it is important to stay in tune with the new data as it comes in. Understanding market mechanics can give you a big edge. For example, about two thirds of the market rise this year is due to market mechanics. For those who want next-level information, a podcast titled “Market Mechanics: Gain An Edge From Year End Chase '' will go live in Arora Ambassador Club today. 
• 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. AMZN, Alphabet Inc Class C GOOG, Meta Platforms Inc META, NVIDIA Corp NVDA, and Tesla Inc TSLA.

In the early trade, money flows are negative in Apple Inc AAPL and Meta Platforms Inc META.

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

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.

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

Oil

OPEC+ left production unchanged.

API crude inventories came at a draw of 4.210M barrels vs. a consensus of a draw of 0.092M barrels.

The momo crowd is buying oil in the early trade. 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 will depend on 🔒. 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.