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.
NEW CHINA ANNOUNCEMENT DAMPENS THE SENTIMENT, ANOMALIES IN JOBS REPORT
To gain an edge, this is what you need to know today.
New China Tariffs
China has announced plans to impose between 5% and 25% tariffs on $60 billion of U. S. goods if the U. S. goes ahead with tariffs on $200 billion of Chinese goods.
This new China announcement is dampening the sentiment.
Anomalies In Jobs Report
Nonfarm Private Payrolls came at 170K vs. 187K consensus. On the surface this report looks weak. However it appears that the consensus did not take into account job loss from the closing of Toys “R” Us stores.
Momo Crowd And Smart Money In Stocks
The momo crowd is buying stocks in the early trade. The momo crowd is especially aggressive in buying Apple (AAPL), Tesla (TSLA), Amazon (AMZN) and Facebook (FB). The smart money is lightly selling.
Gold
The momo crowd is buying gold as has been the historical pattern on the jobs report day. The smart money is inactive in gold.
Oil
The momo crowd is buying oil. The smart money is inactive.
Technical Patterns
None of note.
This is powerful information and many investors use this to enter trades in addition to our official signals. Here are the three most common uses: 1) Short-term trades in ETFs 2) Decisions to trim or add to long-term positions, and 3) New option trades. 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 can swing either way.
Interest rates are ticking down and bonds are ticking up on weak jobs report headline.
There is also selling in the dollar on a weak jobs report.
Gold futures are at $1223, silver futures are at $15.48, and oil futures are $68.84.
S&P 500 resistance levels are 2840, 2860 and 2918; support levels are 2800, 2765 and 2740.
DJIA futures are down 12 points.
THE MOST IMPORTANT TRADE WAR CHART, RAISE CASH AND HEDGES
To gain an edge, this is what you need to know today.
The Most Important Trade War Chart
The Trump administration is looking at imposing 25% tariffs on $200 billion of Chinese goods. The previous proposal was for 10% tariffs.
Many investors are not as concerned about the trade war as they ought to be. The reason is that they look at the charts of Dow Jones Industrial Average (DJIA), S&P 500 ETF (SPY), Nasdaq 100 ETF (QQQ) and small cap ETF (IWM). These charts do not show much damage from the trade war.
Prudent investors ought to look at this most important chart and it may change your mind.
Please click here for the chart of Mainland China ETF (ASHR). The chart shows ASHR dropping 29% from its peak.
Could this happen to U. S. stocks? It is not likely but not impossible.
Two Stocks To Watch
The U. S. based investors may want to closely watch Boeing (BA) and Caterpillar (CAT). Professional investors are keeping a close eye on these two stocks as a proxy for the trade war.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively selling stocks in the early trade. The smart money is lightly selling in the early trade.
Gold
Trading in gold is listless.
Oil
Oil is seeing some selling on trade war concerns.
Technical Patterns
None of note.
This is powerful information and many investors use this to enter trades in addition to our official signals. Here are the three most common uses: 1) Short-term trades in ETFs 2) Decisions to trim or add to long-term positions, and 3) New option trades. 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.
Interest rates are ticking up and bonds are ticking down.
Gold futures are at $1225, silver futures are at $15.44, and oil futures are $67.36.
S&P 500 resistance levels are 2800, 2840 and 2860; support levels are 2765, 2740 and 2700.
DJIA futures are down 162 points.
THE FED DAY, 3% YIELD HIT, 25% TARIFF
To gain an edge, this is what you need to know today.
The Fed Day
The Fed will announce its statement at 2:00 pm ET. The consensus is for no rate increase. However, we will be reading the tea leaves for future direction of the monetary policy. Please stay alert around this time in case there are opportunities.
3% Yield
The 10-year Treasuries are hitting 3% yield for the first time since May. This is important because bonds offer competition to stocks. Rising rates create headwinds for stocks.
25% Tariff
Trump administration is floating the idea of 25% tariff on $200 billion of Chinese goods. The previous proposal has been 10%.
China
Export oriented stocks are getting hit in China.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively buying in the early trade. The smart money is inactive.
Gold
Gold is coming under slight pressure due to rising rates.
Oil
Oil is falling as short squeeze seems to be easing.
Technical Patterns
Several energy stocks are tracing an Engulfing Line. This is bearish. ETF of interest is XLE.
Italian stocks are tracing an Exhaustion Bar. This is bearish. ETF of interest is EWI.
This is powerful information and many investors use this to enter trades in addition to our official signals. Here are the three most common uses: 1) Short-term trades in ETFs 2) Decisions to trim or add to long-term positions, and 3) New option trades. 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 can swing either way.
Interest rates are moving higher and bonds are moving lower.
Gold futures are at $1230, silver futures are at $15.48, and oil futures are $67.71.
S&P 500 resistance levels are 2840, 2860 and 2918; support levels are 2800, 2765 and 2740.
DJIA futures are down 6 points.
BANK OF JAPAN SURPRISE CREATES POSITIVE SENTIMENT ACROSS THE GLOBE
To gain an edge, this is what you need to know today.
Bank Of Japan Surprise
The market was expecting the Bank of Japan to make a hawkish tweak to its monetary policy to raise some interest rates on the yield curve. In a surprise decision, the tweak from the Bank of Japan is dovish.
This has weakened the yen and is creating positive sentiment across the globe.
Momo Crowd And Smart Money In Stocks
The momo crowd is buying in the early trade. The smart money is inactive.
Gold
Trading in gold is listless with slight pressure due to the weaker yen.
Oil
Oil continues to see buying related to a short squeeze.
Technical Patterns
None of note.
This is powerful information and many investors use this to enter trades in addition to our official signals. Here are the three most common uses: 1) Short-term trades in ETFs 2) Decisions to trim or add to long-term positions, and 3) New option trades. 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 can swing either way.
Bonds and interest rates are range bound.
Gold futures are at $1228, silver futures are at $15.46, and oil futures are $69.68.
S&P 500 resistance levels are 2840, 2860 and 2918; support levels are 2800, 2765 and 2740.
DJIA futures are up 7points.
A RARE SHORT SELL CALL BY A BIG BANK ON FAANG STOCKS, BIG WEEK FOR MONETARY POLICY
To gain an edge, this is what you need to know today.
A Rare Short Sell Call By A Big Bank On FAANG Stocks
Big Wall Street banks are in the business of selling stock to investors. They accomplish this with their constant mantra of ‘buy, buy, buy’ to investors. On top of this, big mutual fund companies such as Vanguard, are always promoting passive investing by buying indexes. FAANG stocks have become a disproportionate portion of indexes but most investors are blind to this fact and mutual fund companies hide this fact.
Sell calls are rare from big Wall Street banks. Calls to go one step further and short sell are extremely rare from big banks. In short selling, investors bet on the price falling.
In an extremely rare call Bank of America (BAC) Merrill Lynch is making a call to short sell FAANG stocks. FAANG stocks are FB, AMZN, AAPL, NFLX, GOOG, GOOGL.
We wanted to make you aware of this call due to its high importance and rarity. Normally we do not address analysts’ calls in the Morning Capsule.
Our portfolios are correctly positioned. Before this call we reduced exposure to technology ETF IYW in ZYX Global and reduced exposure to semiconductor stocks earlier. In ZYX Buy, the position sizes being held for these stocks are correct but we may be making further changes. Look for individual posts.
In ZYX Short, it is too early to wholesale short these stocks as BAC recommends. Look for individual posts in due course.
Please keep in mind that big banks are often wrong and nobody should follow their calls blindly.
Big Week For Monetary Policy
This is a big week for monetary policy. The Fed, BOJ, ECB and BOE are holding meetings. These are the world’s biggest central banks. We will be covering these in the Morning Capsules.
Momo Crowd And Smart Money In Stocks
The momo crowd is buying in early trade. In spite of BAC call, the momo crowd is aggressively buying FAANG stocks. The smart money is inactive.
Gold
Gold is seeing some buying as dollar weakens.
Oil
Oil is experiencing buying due to a short squeeze.
Technical Patterns
None of note.
This is powerful information and many investors use this to enter trades in addition to our official signals. Here are the three most common uses: 1) Short-term trades in ETFs 2) Decisions to trim or add to long-term positions, and 3) New option trades. 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 it can swing either way.
Interest rates are ticking up and bonds are ticking down.
Gold futures are at $1232, silver futures are at $15.52, and oil futures are $70.27.
S&P 500 resistance levels are 2840, 2860 and 2918; support levels are 2800, 2765 and 2740.
DJIA futures are up 39 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 holding cash or treasury bills 22% – 32% and short to medium-term hedges of 10% – 15% and very short term hedges of 15%.
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