WEEKLY MARKET DIGEST: FED HAWKISH, DOLLAR STRONGEST SINCE 2003, SILVER SLAMMED BY SMART MONEY $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO $XOM

   WEEKLY MARKET DIGEST: FED HAWKISH, DOLLAR STRONGEST SINCE 2003, STOCKS RESILIENT, SILVER SLAMMED BY SMART MONEY $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO $XOM

Weekly Digest from The Arora Report is popular among serious investors and money managers because they have found studying insights from the prior week gives them an edge over the coming weeks. Here is the day by day rundown from the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers of The Arora Report

Please scroll down for the section What To Do Now.

QUADRUPLE WITCHING, MONEY FLOWING INTO JAPAN, GOLD SHORT COVERING BOUNCE

This is what you need to know today.

Quadruple Witching

Some of yesterday’s strength in the stock market was related to buying for position squaring ahead of quadruple witching.  It appears that position squaring is not all done, this may bring further strength to stocks especially early on.

Money Flowing Into Japan

Over the last week, money is flowing into Japan.  The concept is that weaker yen will increase earnings for corporate Japan.  Japan is mostly an export oriented economy.

As a full disclosure, ZYX Allocation has three positions in Japan, and ZYX Buy has two positions in Japan.

Gold Short Covering

Shorts are booking profits in gold and silver.  Such buying is giving both metals a slight lift.

Canary In The Coal Mine

In 1997 a major currency crisis occurred that started in Asia.  Since then, investors stay alert to Asian currencies. Ringgit is hitting 4.47 against the dollar.  This is approaching 1997 crisis levels.  We will be keeping a close eye on ringgit. If it goes into a freefall, it could halt the stock market rally in the U. S.

Markets

Our very, very short-term early stock market indicator is neutral but expect stocks to run higher in the pre-market.  It is difficult to see what will happen after December futures expire in the pre-market.

Strong dollar rally from yesterday has temporarily come to a halt.

Interest rates, bonds and oil are range bound.

Gold futures are at $1136, silver futures are at $16.13, and oil futures are $51.12.

S&P 500 resistance levels are 2288, 2300 and 2334; support levels are 2250, 2222, and 2200.

DJIA futures are up 39 points.

FED HAWKISH, DOLLAR STRONGEST SINCE 2003, STOCKS RESILIENT, SMART MONEY SLAMS SILVER

This is what you need to know today.

Fed Hawkish

From yesterday’s Morning Capsule,

Today FOMC will announce its rate decision.  Consensus is for a rise of 0.25%.  The focus will be on Yellen’s press conference this afternoon for hints on 2017 rate direction.

The Fed raised by 0.25% in accordance with the consensus.  However, Fed is indicating three rate increases next year, the consensus was for two rate hikes.

50% Probability of a May Rate Hike

Investors must look forward.  In our analysis, now there is a 50% probability of a rate hike in May 2017.

Dollar Strongest Since 2003

After the Fed statement, dollar has climbed to be the strongest since 2003.  Dollar yen has 118 handle and euro dollar has 1.04 handle.  Emerging market currencies are being crushed.

Stocks Resilient

If the same statement had come out of the Fed before the election, DJIA would have likely been down more than 500 points.  Yesterday stocks went down only slightly and are bouncing in the pre-market.

Stocks are staying resilient due to performance chase by lagging money managers.

Smart Money Slams Silver

Day before yesterday we wrote in the Morning Capsule,

Gold is being bought by the momo crowd on the belief that the Fed will not raise rates.  If the momo crowd is right, gold will fly tomorrow afternoon.

The insight here is that historically the momo crowd has lost money in gold and is not the crowd to follow.

Once again, momo crowd is losing big money.  Gold is being crushed.  Even after the Fed decision, momo crowd aggressively bought silver.  The smart money took advantage of the strength in silver relative to gold and slammed it hard.  This morning silver has lost about 6%.

As a full disclosure, yesterday after the Fed, ZYX Short increased its net short exposure to precious metals and miners and provided an idea to short silver miner CDE for those not in precious metals.  CDE has fallen about 10% since that post.

Markets

Our very, very short-term early stock market indicator is negative.

Interest rates are dipping after rise in the wake of the Fed.  Bonds are also recovering as of this writing.

Oil is testing $50 support.

Gold futures are at $1132, silver futures are at $16.12, and oil futures are $50.21.

S&P 500 resistance levels are 2288, 2300 and 2334; support levels are 2222, 2200, and 2180.

DJIA futures are up 33 points.

GOLD ENCOURAGED BY HOTTER PPI, THE FED DAY AND IMPORTER REBELLION AGAINST TRUMP

This is what you need to know today.

Hotter PPI

Core Producer Price Index (PPI) came at 0.4% vs. 0.2% consensus.  PPI is a leading indicator of inflation as prices at producer level often go up before they go up at the consumer level.

Retail Sales

70% of the American economy is consumer based.  For this reason, retail sales data is extremely important to investors.

Retail Sales Ex-auto came at 0.2% vs. 0.4% consensus.  We exclude automotive from our models because automotive data is very noisy.   Please click here to see how our timing model works.

Gold Encouraged

Gold is encouraged by strong inflation data.  Historically gold is a hedge against inflation.  Strong buying is coming into gold on PPI data.

The Fed Day

Today FOMC will announce its rate decision.  Consensus is for a rise of 0.25%.  The focus will be on Yellen’s press conference this afternoon for hints on 2017 rate direction.

Rebellion

Importers, including large retailers, are gearing up for a rebellion against Trump agenda.  If it gains steam, some of the euphoria may come out of the stock market.

Quadruple Witching

This Friday is quadruple witching when stock index futures, stock index options, stock options, and single stock futures expire.  Expect a fair amount of volatility.

Markets

Our very, very short-term early stock market indicator is neutral but expect a fair amount of volatility due to quadruple witching.

Euphoria in dollar and oil is evaporating.  Both dollar and oil have given up their earlier gains.

Interest rates are ticking down and bonds are ticking up.

Gold futures are at $1163, silver futures are at $17.12, and oil futures are $52.24.

S&P 500 resistance levels are 2288, 2300 and 2334; support levels are 2250, 2122, and 2200.

DJIA futures are down 19 points.

OIL EXECUTIVE WITH CLOSE RUSSIAN TIES TO BE SECRETARY OF STATE, OPTIMISM OVER UNICREDIT, BUYING IN GOLD

This is what you need to know today.

Russian Ties

Exxon (XOM) CEO Rex Tillerson has been picked by Trump as his secretary of state.  Tillerson is known for his close ties with Russia.

The insight here is to buy Russia on a pullback.  As a full disclosure, ZYX Emerging and ZYX Allocation have positions in Russia.

Optimism Over Unicredit

There is optimism over Unicredit.  Unicredit is Italy’s biggest bank.  The company has been plagued with losses.  Unicredit is planning to raise $13.8 billion of new capital, layoff 6500 people and sell bad loans.  Shares of the bank are up over 9% in Milan.  Optimism over the deal is lifting stocks in Europe and in the United States.

Gold

Gold is being bought by the momo crowd on the belief that the Fed will not raise rates tomorrow.  If the momo crowd is right, gold will fly tomorrow afternoon.

The insight here is that historically the momo crowd has lost money in gold and is not the crowd to follow.

Markets

Our very, very short-term early stock market indicator is positive.

Oil, bonds, interest rates and currencies are range bound.

Gold futures are at $1162, silver futures are at $17.13, and oil futures are $53.22.

S&P 500 resistance levels are 2288, 2300 and 2334; support levels are 2132, 2120, and 2100.

DJIA futures are up 98 points.

TRUMP MIGHT KILL TRUMP RALLY STARTING THIS WEDNESDAY, SAUDI SHOCK AND AWE

This is what you need to know today.

Trump Might Kill Trump Rally

Please see a separate post that will follow shortly.

Saudi Shock And Awe

OPEC and non-OPEC countries reached an agreement on oil this weekend.  Non-OPEC countries will reduce oil production by 558K barrels vs. 600K barrels consensus.  Normally this would have been negative for oil, however Saudi has decided to display shock and awe.  Saudi is saying that it will further cut production and do what ever it takes to bring oil demand and supply in balance.  Oil is being aggressively bought.

Gold

Gold was being aggressively sold overnight and early this morning.  When gold hit $1153, aggressive buying came in.  Aggressive buying continues as of this writing.  This is a small positive in that someone was willing to step in with large buys without waiting for $1150 support to be hit and stops under $1150 to be taken out.

After buying in gold started, buying in silver is on steroids.

Markets

Our very, very short-term early stock market indicator is negative.

Interest rates are ticking up and bonds are ticking down.

Dollar is giving up its earlier strength as of this writing.

Copper is giving up its earlier strength.

Gold futures are at $1162, silver futures are at $17.14, and oil futures are $53.60.

S&P 500 resistance levels are 2280 2300 and 2334; support levels are 2250, 2222, and 2200.

DJIA futures are up 4  points.

 

WHAT TO DO NOW

Looking ahead and not only in the rear view mirror, consider continuing to hold existing core portfolio positions. Based on individual risk preference, consider 27 – 38% of assets in cash or treasury bills, and short to medium-term hedges of  25% and very short term hedges of 5%.

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