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.
JOB ADDS MISS CONSENSUS, STOCKS AND GOLD ROCKETING UP, RUSSIA MOVES OIL
This is what you need to know today.
Jobs
August Non-farm Private Payrolls came at 126K vs. 175K consensus. This number shows that job growth is cooling. Further evidence of cooling job growth is that average work week came at 34.3 vs. 34.5 and average hourly earnings increase came at 0.1% vs. 0.2%.
Reaction
Stocks, gold, silver, yen, euro and bonds are rocketing up in reaction to the jobs report. The thinking of market participants is that the negative jobs report makes all of the hawkish pronouncements at Jackson Hole difficult to implement.
Markets seem to be shifting back to the mode of partying on the assumption that Fed will not raise rates in September.
Our Analysis
There is about 40% probability that currencies will have difficulty holding their gains. This may make it difficult for stocks, gold and bonds to hold initial gains.
Oil
Arkady Dvorkovich, deputy prime minister of Russia, is out with a statement that Russia is ready to make an oil deal.
The statement conflicts with an earlier statement from Russia’s energy minister that there is no need for a freeze. None-the-less oil is spiking up.
Markets
Our very, very short-term early stock market indicator is positive.
Interest rates are ticking down.
Gold futures are at $1329, silver futures are at $19.34, and oil futures are $43.93.
S&P 500 resistance levels are 2200, 2222 and 2250; support levels are 2165, 2150, and 2132.
DJIA futures are up 66 points.
UNEXPECTED STRENGTH IN CHINA, GOLD MINER ETF SWINGS BEARISH
This is what you need to know today.
Jobless Claims
Initial Weekly Jobless Claims came at 263K vs. 265K consensus. This is a leading indicator and carries heavy weight in our models.
Strength In China
China Manufacturing PMI came at 50.40 vs. 49.5 consensus. A number above 50 indicates economic expansion.
China Services PMI came at 53.4 vs. 53 consensus.
Gold Miner ETF Swings Bearish
Gold miner ETF has now swung bearish losing over 20% of its value from the high. The most popular gold miner ETF with the momo crowd is JNUG. JNUG has fallen from a high of $33.29 to $15.44. Junior gold miner ETF GDXJ has fallen from high of $52.50 to $41.76.
Spain
Spain is heading toward third election as Prime Minister Rajoy failed to win confidence of the Parliament.
British Pound
British pound is rocketing up on better than expected PMI in U. K.
Oil
EIA data was bearish for oil.
Adding to the bearishness is a statement by the Russian Energy Minister stating that he sees no need for an oil production freeze.
Markets
Our very, very short-term early stock market indicator is neutral.
Dollar is stronger against yen and euro.
Gold and silver are slightly weaker but in strong support zones.
Interest rates are ticking up and bonds are ticking down.
Gold futures are at $1309, silver futures are at $18.72, and oil futures are $44.05.
S&P 500 resistance levels are 2165, 2200 and 2222; support levels are 2150, 2132, and 2120.
DJIA futures are down 12 points.
FAIR AMOUNT OF ECONOMIC DATA BUT BIG MONEY IN THE MODE OF POSITION SQUARING AHEAD OF JOBS FRIDAY
This is what you need to know today.
Jobs Friday
The Department of Labor will release jobs report at 8:30 am ET on Friday. This is the next major market mover. Institutions are in the mode of position squaring ahead of this big number.
ADP Employment Change
ADP is the largest private payroll processor in the United States. It uses its data to provide a monthly employment change report ahead of the official government report. ADP came at 177K vs. 170K consensus.
Oil
API oil inventory came at +0.94 million vs. -1.0 million consensus. Oil has dipped below $46 on this bearish data.
EIA inventory data, considered more influential, will be released at 10:30 am ET.
Gold
Gold is trading in the major support zone of $1295 to $1313. Gold rallied on aggressive momo crowd buying after yesterday’s close but fell after the release of strong ADP data.
Eurozone
Consumer Price Index (CPI) rose 0.2% vs. 0.3% consensus.
India Cools
India GDP growth came at 7.1% vs. 8.% consensus.
Brazil
The Senate in Brazil is preparing the final vote on Rousseff’s impeachment.
Brazil GDP contracted 0.6% vs. -0.5% consensus.
Presidential Election
Financial markets are trading as though Clinton has won. In a surprise announcement last night, Trump will visit Mexico and meet Mexican president ahead of Trump’s much awaited speech on immigration.
If Trump is able to close the gap with Clinton in opinion poles, it will provide several short-term investment opportunities.
Japan
Japanese stocks have been moving higher as yen weakens.
Markets
Our very, very short-term early stock market indicator is neutral but expect market to open slightly lower.
Dollar continues to be stronger.
Interest rates and bonds are range bound.
Gold futures are at $1310, silver futures are at $18.69, and oil futures are $45.86.
S&P 500 resistance levels are 2200, 2222 and 2250; support levels are 2165, 2150, and 2132.
DJIA futures are down 27 points.
FISCHER AFFIRMS NO NEGATIVE INTEREST RATES, STORM IN THE GULF MOVING OIL
This is what you need to know today.
Interest Rates
Federal Reserve Vice Chairman, Fischer, has reaffirmed this morning that the Fed is not planning on negative interest rates in the United States.
Oil
Due to storm activity in the Gulf of Mexico, as a precautionary measure, there have been significant shut downs in the Gulf. This is supporting oil and natural gas prices.
Markets
Our very, very short-term early stock market indicator is neutral.
Dollar is stronger against yen and euro.
Gold and silver were moving lower until a major media outlet headline of gold at $1700 appeared, the headline is providing support for gold. However, the up move is not likely to last if dollar stays strong.
Interest rates and bonds are range bound.
Gold futures are at $1323, silver futures are at $18.75, and oil futures are $47.39.
S&P 500 resistance levels are 2200, 2222 and 2250; support levels are 2165, 2150, and 2132.
DJIA futures are down 7 points.
YELLEN MAKES STOCKS, BONDS AND GOLD VULNERABLE; OIL FALLS
This is what you need to know today.
Stocks, Bonds And Gold
In her much anticipated speech at the Federal Reserve Bank of Kansas City Symposium at Jackson Hole, Wyoming, Janet Yellen started out by eloquently making a clear case for a Fed rate hike. Then it seems she could not help herself and turned wishy-washy.
Yellen’s wishy-washiness has made the markets vulnerable in both directions. The reason is that due to her wishy-washy stance, bulls can read her statement as bullish and at the same time bears can read her statement as bearish. The chart illustrates the battle between bulls and bears prompted by Yellen’s wishy-washiness.
Please click here for the chart.
The chart is a one minute chart around the time of Yellen’s speech comparing popular ETFs including S&P500 ETF SPY, Nasdaq 100 ETF QQQ, gold ETF GLD, silver ETF SLV, gold miner ETF GDX, bond ETF TLT, dollar ETF UUP and vix ETF VXX.
Intermarket analysis is one of the most valuable and easiest to use tool for investors. Take a few minutes to stare at the chart if you are not used to intermarket analysis and you will see new insights jumping at you from the chart.
As the chart shows, after Yellen’s speech, all major markets experienced high volatility both to the upside and to the downside.
Let us dissect Yellen’s speech. Here are the excerpts from Yellen’s speech that ruined the clarity and made the speech wishy-washy.
- the economic outlook is uncertain
- monetary policy is not on a preset course
- ability to predict how the federal funds rate will evolve over time is quite limited
- monetary policy will need to respond to whatever disturbances may buffet the economy
- underlying economic conditions that are often evident only in hindsight
- likely outcomes for the federal funds rate is quite wide
- economy is frequently buffeted by shocks and thus rarely evolves as predicted
Oil
Oil is falling on reports that Iran may expand oil production.
Japan
Nikkei 225 rocketed 2.3% as yen weakened on a statement by Kuroda of Bank of Japan at Jackson Hole.
Spain
Conservatives agree to centrist party’s agenda in return for support for Rajoay for a second term as prime minister. Rajoay is still short of 176 votes he needs to be re-elected prime minister.
Markets
Our very, very short-term early stock market indicator is neutral but expect market to open higher.
Dollar is stronger.
Interest rates are ticking up and bonds are ticking down.
Momo crowd is aggressively buying gold and silver on the dip.
Gold futures are at $1323, silver futures are at $18.58, and oil futures are $46.77.
S&P 500 resistance levels are 2200, 2222, and 2250; support levels are 2165, 2150, and 2132.
DJIA futures are up 5 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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