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Feb. 5, 2020, 4:02 p.m. EST

Bulls are running in the stock market as the weak hands are flushed out

A confluence of events is giving the market a kick

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By Nigam Arora


Everett

After a brief pause, the bulls in the stock market are running again.

Adding a kick to their step: A flushing out of weak hands, a potential coronavirus breakthrough, Iowa political chaos and the love (by investors) of President Trump.

Let’s examine the issue with the help of a chart.

Chart

Please click here for an annotated chart of S&P 500 ETF /zigman2/quotes/209901640/lastsale SPY -1.45% , which tracks the benchmark S&P 500 Index /zigman2/quotes/210599714/realtime SPX -1.51% .

Note the following:

• The VUD indicator is the most sensitive measure of net supply and demand in real time. On the chart, the VUD indicator is shown with orange when there is net selling and with green when there is net buying.

• Focus on the big orange area in the lower pane toward the right. Notice that the big orange spike occurred right at the bottom in the stock market.

• Notice the highest green spike before the stock market started falling.

• Notice the difference in the magnitude of the green and orange areas marked on the chart.

• The sum total of the foregoing is that the weak hands have been flushed out. After this happens, there tends to be a strong two- to three-day rally.

Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.

Earnings season

Earnings season is in full swing. Among the big-cap popular tech stocks, Amazon /zigman2/quotes/210331248/lastsale AMZN -0.64% , Apple /zigman2/quotes/202934861/lastsale AAPL -1.44% and Microsoft /zigman2/quotes/207732364/lastsale MSFT -0.92% reported stellar earnings. However, /zigman2/quotes/205453964/lastsale GOOG -2.05%   /zigman2/quotes/202490156/lastsale GOOGL -2.18% and Facebook /zigman2/quotes/205064656/lastsale FB -2.53% reported mixed earnings. Keep in mind that, in this market, “bad” news is “good” news.

Semiconductors have been leading indicators. Intel /zigman2/quotes/203649727/lastsale INTC -0.40% and Western Digital /zigman2/quotes/204213617/lastsale WDC -0.49% reported good earnings, and AMD /zigman2/quotes/208144392/lastsale AMD -4.27% , not so good. Please see “Apple may have had blowout earnings, but these risks to the stock have emerged” and “How and when prudent investors ought to buy these 5G stocks.”

Tesla /zigman2/quotes/203558040/lastsale TSLA +5.62% experienced a massive short squeeze after game-changing earnings. Please see “A perfect combination for Tesla’s stock gains — future fantasies, short selling and FOMO.”

Coronavirus breakthrough

A team led by Li Lanjuan, a leading scientist in China, is reporting a breakthrough in the treatment of coronavirus. Two drugs, Abidol and Darunavir, have been shown to inhibit the coronavirus in vitro. Stock futures jumped on the news, and the main benchmarks are in the green today.

Iowa chaos

The chaos in Iowa on reporting results from the caucus continues to add to the bullishness in the stock market. If Democrats can’t even manage technology to report results in a small state, they cannot possibly beat Trump, who has a massive data machine — so the story goes.

Love for Trump

Stock market investors love Trump, especially after Tuesday night’s State of the Union speech, in which he boasted about the economy. Speaker of the House Nancy Pelosi, at the end, dramatically ripped up her copy of Trump’s speech in an effort to make a statement.

Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article or may take positions at any time. <INTERNAL-PAGE URL="/author/nigam-arora">Nigam Arora</INTERNAL-PAGE> is an investor, engineer and nuclear physicist by background who has founded two Inc. 500 fastest-growing companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at Nigam@TheAroraReport.com.

/zigman2/quotes/209901640/lastsale
US : U.S.: NYSE Arca
$ 248.19
-3.64 -1.45%
Volume: 135.56M
April 3, 2020 8:00p
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/zigman2/quotes/210599714/realtime
US : S&P US
2,488.65
-38.25 -1.51%
Volume: 3.59B
April 3, 2020 5:10p
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/zigman2/quotes/210331248/lastsale
US : U.S.: Nasdaq
$ 1,906.59
-12.24 -0.64%
Volume: 3.61M
April 3, 2020 4:00p
P/E Ratio
82.83
Dividend Yield
N/A
Market Cap
$949.21 billion
Rev. per Employee
$359,671
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/zigman2/quotes/202934861/lastsale
US : U.S.: Nasdaq
$ 241.41
-3.52 -1.44%
Volume: 32.47M
April 3, 2020 4:00p
P/E Ratio
19.07
Dividend Yield
1.28%
Market Cap
$1056.28 billion
Rev. per Employee
$1.98M
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/zigman2/quotes/207732364/lastsale
US : U.S.: Nasdaq
$ 153.83
-1.43 -0.92%
Volume: 41.24M
April 3, 2020 4:15p
P/E Ratio
26.78
Dividend Yield
1.33%
Market Cap
$1170.04 billion
Rev. per Employee
$902,473
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/zigman2/quotes/205453964/lastsale
US : U.S.: Nasdaq
$ 1,097.88
-22.96 -2.05%
Volume: 2.31M
April 3, 2020 4:00p
P/E Ratio
22.32
Dividend Yield
N/A
Market Cap
$769.02 billion
Rev. per Employee
$1.39M
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/zigman2/quotes/202490156/lastsale
US : U.S.: Nasdaq
$ 1,092.70
-24.33 -2.18%
Volume: 2.57M
April 3, 2020 4:00p
P/E Ratio
22.22
Dividend Yield
N/A
Market Cap
$769.02 billion
Rev. per Employee
$1.39M
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/zigman2/quotes/205064656/lastsale
US : U.S.: Nasdaq
$ 154.18
-4.01 -2.53%
Volume: 25.98M
April 3, 2020 4:00p
P/E Ratio
23.96
Dividend Yield
N/A
Market Cap
$439.48 billion
Rev. per Employee
$1.57M
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/zigman2/quotes/203649727/lastsale
US : U.S.: Nasdaq
$ 54.13
-0.22 -0.40%
Volume: 23.91M
April 3, 2020 4:00p
P/E Ratio
11.47
Dividend Yield
2.44%
Market Cap
$231.71 billion
Rev. per Employee
$659,665
loading...
/zigman2/quotes/204213617/lastsale
US : U.S.: Nasdaq
$ 38.21
-0.19 -0.49%
Volume: 3.42M
April 3, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
5.23%
Market Cap
$11.42 billion
Rev. per Employee
$270,824
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/zigman2/quotes/208144392/lastsale
US : U.S.: Nasdaq
$ 42.59
-1.90 -4.27%
Volume: 79.33M
April 3, 2020 4:00p
P/E Ratio
143.55
Dividend Yield
N/A
Market Cap
$49.87 billion
Rev. per Employee
$641,089
loading...
/zigman2/quotes/203558040/lastsale
US : U.S.: Nasdaq
$ 480.01
+25.54 +5.62%
Volume: 22.56M
April 3, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$88.51 billion
Rev. per Employee
$439,627
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Nigam Arora is an engineer, nuclear physicist, author, and entrepreneur and the founder of two Inc. 500 fastest growing companies. He is also the developer of the ZYX Change Method to profit from change by investing. The premise is that most money is made by predicting change before the crowd. Arora is the chief investment officer at The Arora Report and the editor of four newsletters that track the ZYX Change Method. Nigam can be reached at Nigam@TheAroraReport.com

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