WEEKLY MARKET DIGEST: UPWARD PRESSURE FROM QUADRUPLE WITCH, RATE HIKES, MODI LANDSLIDE AND GOLD $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO

   WEEKLY MARKET DIGEST: UPWARD PRESSURE FROM QUADRUPLE WITCH, RATE HIKES, MODI LANDSLIDE AND GOLD $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.

QUADRUPLE WITCHING EXERTING UPWARD PRESSURE ON THE MARKET, WEAK INDUSTRIAL PRODUCTION, HIGHER OIL DEMAND, GOLD STEADY

This is what you need to know today.

Quadruple Witching

Today is quadruple witching when index futures, index options, single stock options, and single stock futures expire.  This expiry has been exerting upward pressure on the stock market.

Often part of the gains from this week get reversed in the following week.

Weak Industrial Production

Industrial Production came at 0.0% vs. 0.2% consensus.

Gold Steady

Gold is steady and holding most of the gains.  The ‘smart money’ is inactive for a change, momo crowd is also inactive.

Oil Jumps

Oil is jumping on a report that demand is rising.  BHI rig count will be released at 1:00 pm ET and may potentially move the market.

Markets

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

Dollar is weaker.

Bonds and interest rates are range bound.

Gold futures are at $1229, silver futures are at $17.36, and oil futures are $49.63.

S&P 500 resistance levels are 2400, 2450 and 2500; support levels are 2363, 2334, and 2300.

DJIA futures are up 27 points.

POSITIONING CAUSES RALLY IN STOCKS, GOLD AND BONDS, OIL RALLY ON EIA, DUTCH ELECTION AND STRONG HOUSING

This is what you need to know today.

Positioning Causes Rally In Stocks, Gold And Bonds

Fed raised rates by 0.25%.  The accompanying statement and the press conference were more dovish than the consensus.

  • Stock market was positioned extraordinarily long.  Bulls got encouragement from dovish statement and bought aggressively.
  • Gold was positioned very short.  Dovish statement caused a short squeeze sending gold and silver higher.
  • Bond market was positioned very short.  Dovish statement caused a short squeeze causing bonds to go higher.

Oil Rally

EIA data was bullish for oil.  Oil rallied on the data.

Dutch Election

Dutch election results are out.  The Dutch did not support the far right. This is adding to the optimism in the markets.

Strong Housing

Housing Starts came at 1288K vs. 1260K consensus.  However Building Permits were weak coming at 1213K vs. 1251K consensus.

Markets

Our very, very short-term early stock market indicator is neutral but expect the market to start out positive.

Dollar is weaker.

Gold futures are at $1230, silver futures are at $17.46, and oil futures are $48.96.

S&P 500 resistance levels are 2400, 2450 and 2500; support levels are 2363, 2334, and 2300.

DJIA futures are up 59 points.

POSITIONING AHEAD OF THE FED MAY PROVIDE OPPORTUNITIES, SURPRISE OIL DATA

This is what you need to know today.

Positioning May Create Opportunities

The Fed will announce its rate decision at 2:00 pm ET followed by a press conference at 2:30 pm ET.  Here are the important things to watch.

  • The consensus is that Fed will raise rates by 0.25%. If Fed does not raise rates, it may provide opportunities.
  • The consensus is that there will be one to two more rate increases this year.  If Fed indicates differently, it may provide opportunities.
  • The consensus is that Fed will not raise rates in June.  If the Fed says differently it may provide opportunities.
  • The consensus is that any answers regarding Trump policies will be neutral and diplomatic.  If it is any different it may provide opportunities.

Here are how various markets are positioned.

  • Stock market is extraordinarily long.  Any surprise may cause exit from the same small door at the same time causing a big down draft.
  • Gold market is positioned very short.  Any surprise may cause a short squeeze sending gold and silver  much higher.
  • Bond market is positioned very short.  Any surprise may cause bonds to go higher.

Positioning discussed here is not the entire positioning but positioning at the edges.  It is the positioning at the edges that makes the difference.

Surprise Oil Data

API reported a draw of 531K barrels vs. consensus of a build of 3M  barrels.  The data has caused oil to move up.  A better test will be EIA data that will be released at 10:30 am ET.

Retail Sales

American economy is 70% consumer driven.  Therefore retail sales carry a heavy weight in our timing models.  Retail Sales Ex-auto came at 0.2% vs. 0.1% consensus.  We leave autos out because they are very volatile and cause extra noise.  Please click here to see how we filter out the noise.

Consumer Price Index (CPI)

Core CPI came at 0.2% vs. 0.2% consensus.  We use Core instead of the headline number because it is better predictive for  investments.

Markets

Our very, very short-term early stock market indicator is neutral but expect market to start out positive.

Gold and silver are coming under slight pressure.

Currencies, bonds and interest rates are mostly range bound.

Gold futures are at $1199, silver futures are at $16.92, and oil futures are $48.48.

S&P 500 resistance levels are 2400, 2450 and 2500; support levels are 2363, 2334, and 2300.

DJIA futures are up 35 points.

OIL FALLS TAKING STOCKS WITH IT, WAIT FOR THREE CRUCIAL EVENTS AHEAD, CBO ESTIMATE

This is what you need to know today.

Oil Falls Taking Stocks With It

We recently shared with you the correlation between oil and stocks.  Oil has fallen to a three month low as investors await API data to be released at 4:30 pm ET.  Stocks are likely to open lower with oil.

Three Crucial Events Ahead

Yesterday we told you about four crucial events.  CBO estimates are out but other three events are still ahead.  Markets are waiting nervously.

CBO Estimate

CBO estimate looks bad on the surface in terms of the number of people who will become uninsured under the Republican plan.  In reality the estimate is much better than top Republicans had feared.  This is a positive for the market.

Markets

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

Dollar is slightly stronger.

Gold and silver are range bound.

Interest rates are ticking down and bonds are ticking up.

Gold futures are at $1203, silver futures are at $16.99, and oil futures are $47.71.

S&P 500 resistance levels are 2400, 2450 and 2500; support levels are 2363, 2334, and 2300.

DJIA futures are down 56 points.

FOUR CRITICAL EVENTS AHEAD, MODI LANDSLIDE, AND NEW SCOTTISH VOTE

 This is what you need to know today.

Four Critical Events

Four critical events are ahead this week that may provide significant opportunities and also present pitfalls.  We will do separate posts on specific actions as appropriate when events dictate.

  • CBO scoring of Republican healthcare plan
  • Fed meeting
  • Dutch election
  • BOJ meeting

Modi Landslide

In India, Prime Minister Modi has won unexpected landslide victory in two major state elections.  This will strengthen his hand for more reforms.

As a full disclosure, ZYX Emerging and ZYX Global Allocation have positions in India.

Second Scottish Vote

First Minister Sturgeon is seeking second Scottish independence vote.  Scotland wants to be part of the European Union.  In Brexit, Brittan voted to exit.

Markets

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

Bonds, interest rates, gold, silver, and currencies are range bound as traders wait for the events ahead.

Gold futures are at $1204, silver futures are at $17.02, and oil futures are $48.40.

S&P 500 resistance levels are 2400, 2450 and 2500; support levels are 2363, 2334, and 2300.

DJIA futures are up 16 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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