WEEKLY MARKET DIGEST: TRUMP XI SUMMIT THE NEXT MARKET MOVER, OIL HIGHER ON KUWAIT, SILVER BUYING $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO

 WEEKLY MARKET DIGEST: TRUMP XI SUMMIT THE NEXT MARKET MOVER, OIL HIGHER ON KUWAIT, SILVER BUYING $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO

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.

POSITION SQUARING, TRUMP XI SUMMIT AHEAD, ZUMA AX, GOLD UNDER PRESSURE

This is what you need to know today.

Position Squaring

In addition to today being the last trading day of the quarter in the U. S., tomorrow is the fiscal year end in Japan.  Position squaring is in full force.  Such position squaring will cause several cross currents during the day.

Trump Xi Summit Ahead

Most consequential event ahead for the markets is the summit between Trump and China’s President Xi.  Trump has been very anti China during his campaign.  Now Trump is saying that the summit will be difficult.

Our analysis is that Trump is likely to soften his stance on China.  If Trump fails to do so, expect a down draft in stocks and a move up in gold.

Personal Income And Spending

Personal Income came at 0.4% vs. 0.4% consensus.

Personal Spending came at 0.1% vs. 0.2% consensus.

Zuma Ax

We have previously shared with you that South African President Zuma was planning to fire well regarded Finance Minister Gordhan.  Now Zuma has actually fired nine members of his cabinet.  South African currency rand has tumbled 7.5% this week.

Gold Under Pressure

Gold is under slight pressure as the momo crowd is not buying like they have been on most days recently.  Momo crowd continues to buy silver aggressively.  There is no buying by the ‘smart money.’

Please also see Trump Xi summit and South African comments above.

We have a special interest in South Africa because of  a number of opportunities it provides in precious metal miners.  We have previously written about a closed end fund containing a diversified portfolio of South African precious metal miners that trades in New York at a discount to net asset value.  You will get a signal if and when appropriate.  Such signal will be in ZYX Buy and ZYX Global Multi Asset Allocation Alert.

Other opportunities in South Africa will be in ZYX Emerging Markets ETF Alert.

Technical Patterns

Several Mainland Chinese shares are tracing a Diamond Pattern.  This is bearish.  ETF of interest is ASHR.

Several health care stocks are tracing a Pennant.  This is bearish.  ETF of interest is XLV.

Please note that although traditional technical signals are very popular, they no longer work well.  They used to work much better in the 1980’s.  Now they are obsolete but it is worth paying attention to them because a large number of investors act on them.  If they are exclusively followed, you will lose money over a large number of trades over a long period of time. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators.  To learn more please click here.

Markets

Our very, very short-term early stock market indicator is neutral but expect the market to open lower.

Currencies, bonds and interest rates are range bound.

Oil is holding its gains from yesterday on Kuwait report which we shared with you early yesterday morning.

Gold futures are at $1248, silver futures are at $18.23, and oil futures are $50.18.

S&P 500 resistance levels are 2400, 2450 and 2500; support levels are 2334, 2300, and 2288.

DJIA futures are down 24  points.

GDP REVISED HIGHER, GOLD STEADY EVEN THOUGH DOLLAR IS STRONGER, OIL HIGHER ON REPORT FROM KUWAIT

This is what you need to know today.

GDP Revised Higher

Q4 GDP has been revised higher to 2.1% vs. 2% consensus. The higher revision is primarily due to higher consumption by American consumers.

GDP is a lagging indicator. Our models focus on leading indicators.  However it is important to watch GDP because institutions act on it.

Jobless Claims

Initial Jobless Claims came at 258K vs. 245K consensus.  This is a leading indicator and carries a heavy weight in our models.  The data from the last few weeks is showing that the job picture may have stopped improving.

Gold Steady

Gold typically has an inverse relationship with the dollar.  The dollar is slightly stronger on dovish reports from ECB.  However gold is holding steady.  The momo crowd continues to buy gold.  Momo buying in silver is especially strong as has been the case in recent  days.  There is no buying by the ‘smart money.’

Oil Higher

Oil is higher on a report from Kuwait on a report that all OPEC members will be included in  a production cut.

Technical Patterns

Natural gas is showing a Head and Shoulders Bottom.  This is a bullish pattern.  ETF of interest is UNG.

Several oil stocks are showing a Double Bottom.  This is a bullish pattern.  ETF of interest is XOP.

Several regional banks are showing an Inside Day.  This is a bearish pattern.  ETF of interest is KRE.

Please note that although traditional technical signals are very popular, they no longer work well.  They used to work much better in the 1980’s.  Now they are obsolete but it is worth paying attention to them because a large number of investors act on them.  If they are exclusively followed, you will lose money over a large number of trades over a long period of time. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators.  To learn more please click here.

Markets

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

Interest rates and bonds are range bound.

Gold futures are at $1249, silver futures are at $18.16, and oil futures are $49.86.

S&P 500 resistance levels are 2363, 2400 and 2450; support levels are 2334, 2300, and 2288.

DJIA futures are down 14  points.

WINDOW DRESSING, AFTER CONSUMER CONFIDENCE AND SHORT SQUEEZE MARKET STRUGGLES WITH TRUMP TAX PLAN; BREXIT SUPPORTS GOLD

This is what you need to know today.

Window Dressing

Window dressing is in full swing putting upward pressure on stocks.  For more please see Morning Capsule dated March 21st.

After Consumer Confidence And Short Squeeze Market Struggles With Trump Tax Plan

Yesterday markets screamed higher after consumer confidence surged to a 16 year high.  Consumer Confidence Index jumped to 125.6 vs. 116 consensus.  The  initial rally on consumer confidence triggered the massive short squeeze.  Bears who had sold short on the healthcare reform were forced to buy-to-cover putting extra upward pressure on the market.

This is an example of the true perverse nature of the markets; bears who correctly predicted that the healthcare reform bill would fail ended up losing money because of their correct prediction.  This is a good reminder for all investors that markets are highly complex and traditional ways of analyzing it no longer work.

In the foregoing vein, many investors who placed their stops below the 50 day moving average had their stops taken out only to see the market reverse and run up strongly.  Another example of using traditional technical analysis exclusively causing losses.  We have received many requests to help with a solution.  We will publish a separate post on the subject due to high interest.

What is next for the stock market?  This morning the market is grappling with prospects of Trump tax reform.  Some of the optimism is fading as institutional investors begin to understand the complexity of the task ahead.

Brexit Starts

The U. K. has delivered a letter to the European Union invoking Article 50 of the Lisbon Treaty.  This starts a two-year negotiation process to exit.

Gold Supported On Brexit

Yesterday we lowered our rating on gold in the very, very short term.  Ratings in other time frames remained unchanged.  Subsequent to our rating change, in part caused by our rating change, gold fell about $10 at one time breaking the support at $1250.  This morning there is a new development of Article 50 trigger.  The momo crowd is aggressively buying on this trigger.  Buying is especially strong in silver.  There is no buying by the ‘smart money’ perhaps because Brexit has been largely known.

Oil

API reported a build of 1.91 million barrels vs. 1.0 million barrels consensus.  Oil is seeing buying on Libya concerns we described yesterday.

EIA data will be released at 10:30 am ET and may be a market moving event.

Technical Patterns

S&P 500 bounced strongly after breaching 50 day moving average.  This is a bullish signal as weak hands have been taken out on the breach.  ETF of interest is SPY.

Gold failed at 200 day moving average.  This is bearish.  ETF of interest is GLD.

Natural gas breaks resistance.  This is bullish.  ETF of interest is UNG.

Please note that although traditional technical signals are very popular, they no longer work well.  They used to work much better in the 1980’s.  Now they are obsolete but it is worth paying attention to them because a large number of investors act on them.  If they are exclusively followed, you will lose money over a large number of trades over a long period of time. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators.  To learn more please click here.

Markets

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

Iron ore is seeing a short squeeze.

Currencies, bonds and interest rates are range bound.

Gold futures are at $1252, silver futures are at $18.18, and oil futures are $48.44.

S&P 500 resistance levels are 2363, 2400 and 2450; support levels are 2334, 2300, and 2288.

DJIA futures are down 8  points.

TRUMP MOVES ON, LIBYA SHUTDOWN, RAND SINKS

This is what you need to know today.

Trump Moves On

Yesterday morning when DJIA futures were down about 180 points, financial media was predicting a bad day for the market and many investment services were giving sell signals, under Markets section of the Morning Capsule we wrote,

…the market has the potential to bounce after opening lower.

Also from yesterday’s Morning Capsule,

After the healthcare bill failure, market’s focus is going to shift to tax reform.  Trump may get at least the corporate tax reform done and that is most important for the market.

Late Friday we took off the hedges put in advance of the healthcare vote and did not raise cash levels yesterday morning.

As has been the case most often, our calls were contrary at that time but have proven correct, at least temporarily.  Trump has moved on.  Stock market bounced strongly.  Nasdaq even turned positive.  Going forward, the focus will be on debt ceiling, infrastructure and tax reform.

Libya Pipeline Shutdown

Oil is moving up strongly, including buying by the ‘smart money,’  on shutdown of the pipeline from the Sahara oil field.  This is Libya’s largest oil field.

Gold

Gold price is steady as there are no significant developments to influence the price.  Momo crowd continues to aggressively buy silver. There is no buying by the smart money. There is no buying pressure from India and China.

Rand Sinks

South African currency, rand, is sinking after President Zuma said that he plans to fire Finance Minister Gordhan.  Gordhan is well respected.  Please note that South Africa is one of the larger producers of gold.  If rand sinks further, or there is chaos in South Africa, there may be an opportunity in buying South African gold miners.  We are carefully watching a closed end fund with a diversified portfolio of South African precious metal miners, the attraction is that this fund trades in New York at a discount to its net asset value.

If South African stocks fall into our buy zone, it might be an opportunity.

Technical Patterns

Many silver miners are showing a Hanging Man.  This is a bearish pattern.  ETF of interest is SIL.

Natural gas is showing a bearish Engulfing Line.  The ETF of interest is UNG.

Please note that although traditional technical signals are very popular, they no longer work well.  They used to work much better in the 1980’s.  Now they are obsolete but it is worth paying attention to them because a large number of investors act on them.  If they are exclusively followed, you will lose money over a large number of trades over a long period of time. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators.  To learn more please click here.

Markets

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

Currencies, bonds, interest rates and base metals are mostly range bound.

Gold futures are at $1257, silver futures are at $18.18, and oil futures are $48.31.

S&P 500 resistance levels are 2363, 2400 and 2450; support levels are 2334, 2300, and 2288.

DJIA futures are down 28  points.

MARKET’S REAL PROBLEM IS OBAMA BUT TRUMP MIGHT STILL PREVAIL, GOLD FLIES AS DOLLAR DIPS, IRON ORE AND COPPER CRUSHED

This is what you need to know today.

The market’s real problem is Obama in that for eight years Republicans were united in their dislike for Obama but now that Obama is gone, they have difficulty staying united.

After the healthcare bill failure, market’s focus is going to shift to tax reform.  Trump may get at least the corporate tax reform done and that is most important for the market.

Please see the annotated chart.

Please also note that RSI will be oversold if the market dips into the support zone.

Gold Flies As Dollar Dips

Gold is flying as dollar dips.  Dollar is erasing most of its post election gains.

Momo crowd is buying aggressively.  Buying is especially aggressive in silver by the momo crowd.  There is no buying by the ‘smart money.’ There is no buying pressure from India or China.

In trading gold and silver, it is important to focus on risk adjusted returns, i.e., returns in excess of the risks taken.  It may change but as of this writing there is not a good set up for high risk adjusted returns as the risk is just too high in gold and silver at this time.

Iron Ore And Copper Crushed

Iron ore is falling  3.9% and copper is falling 1.7%.  As you know we have been short selling iron ore, copper and base metals because the rally in these metals was justified by flawed analysis.  Now the market is beginning to see flaws in the prevailing wisdom.

Technical Patterns

S&P 500 futures under 50 day moving average for the first time since the election.

Please note that although traditional technical signals are very popular, they no longer work well.  They used to work much better in the 1980’s.  Now they are obsolete but it is worth paying attention to them because a large number of investors act on them.  If they are exclusively followed, you will lose money over a large number of trades over a long period of time. These should be used judiciously only in conjunction with macro, fundamental and quantitative indicators.  To learn more please click here.

Markets

Our very, very short-term early stock market indicator is negative but the market has the potential to bounce after opening lower.

Bonds are strong and interest rates are falling.

Gold futures are at $1258, silver futures are at $18.04, and oil futures are $47.51.

S&P 500 resistance levels are 2334, 2363 and 2400; support levels are 2300, 2288, and 2250.

DJIA futures are down 173  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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