This was published prior to market open on ZYX Buy Change Alert and other Arora Report services for paying subscribers on Tuesday September 13. This is being made available on The Arora Report Market Blog now due to a large number of emails asking for the real reason behind 258 point DJIA stock market drop. The call has proven spot on and many paying subscriber were able to take advantage of the correct call.
This is what you need to know today.
Brainard speech was ultra-dovish causing stocks, gold, bonds and oil to bounce. It was not much of a surprise since historically Brainard has been the most dovish FOMC member.
Ferocious Sell-Off In JGBs
Japanese government bonds experienced the worst sell-off in about 20 years. The real story here is the Bank of Japan (BOJ) considering maturity range adjustment. In plain English, this means that Bank of Japan is looking into buying more shorter duration bonds and less longer duration bonds. This is causing yields to rise on longer duration bonds.
The most dramatic effect may be repatriation of money back to Japan, causing a sell-off in markets worldwide. To learn more relevant information about Japan, please see ANSWERS TO HARD QUESTIONS THAT SERIOUS PRECIOUS METAL INVESTORS MUST ASK
Lower Oil Demand
In its new report, IEA estimates global oil demand growth to be 1.3 million barrels per day in 2016 compared to its prior estimate of 1.4 million barrels.
IEA also lowers its demand estimate for 2017 by 200,000 barrels per day.
Oil is falling on the news.
Our very, very short-term early stock market indicator is negative.
Gold and silver are seeing buying by the momo crowd but selling smart money on up-spikes.
Interest rates and bonds are range bound but bonds are likely to come under pressure.
All of the foregoing may quickly change on rumors about the Fed.
Gold futures are at $1329, silver futures are at $19.14, and oil futures are $45.45.
S&P 500 resistance levels are 2150, 2165 and 2200; support levels are 2120, 2100, and 2063.
DJIA futures are down 145 points.
What To Do Now?
It is important for investors to look ahead and not in the rear view mirror.
Consider continuing to hold existing positions. Based on individual risk preference, consider holding cash or treasury bills 27 – 38% and short to medium-term hedges of 25% and very short term hedges of 5%.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.
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