WEEKLY MARKET DIGEST: ARORA CALLS ON FED AND BOJ PROVEN SPOT ON, SAUDI OFFERS OIL DEAL, WHAT TO DO NOW $DIA $GLD $QQQ $SLV $SPY $TBT $USO

   WEEKLY MARKET DIGEST: ARORA CALLS ON FED AND BOJ PROVEN SPOT ON, SAUDI OFFERS OIL DEAL, WHAT TO DO NOW $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.

SAUDI OFFERS OIL DEAL TO IRAN, EUROZONE LOSES MOMENTUM

This is what you need to know today.

Oil Deal

There are reports that Saudi has offered a production cut if Iran agrees to a production freeze.   Oil first jumped on the news but then pulled back on concerns about a slowing economy.

Eurozone

The Market Composite PMI for Eurozone came at 52.6 vs. 52.9 consensus.  This data indicates Eurozone economy could be losing momentum.

Fed Speak

There are four Fed speakers today and 12 next week.  Expect their statements to keep the markets volatile.

Markets

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

Bonds, currencies, interest rates, gold and silver are range bound.

Gold futures are at $1343, silver futures are at $19.95, and oil futures are $46.16.

S&P 500 resistance levels are 2200, 2222 and 2250; support levels are 2150, 2132, and 2120.

DJIA futures are down 11 points.

OUR CALL ON FED PROVEN SPOT ON, SERIOUS DISCONNECTS DEVELOP AS ALMOST EVERYTHING ALMOST EVERYWHERE RUNNING UP

This is what you need to know today.

Spot On Fed Call

Fed’s decision yesterday was fully inline with our higher probability scenario call.  All four elements of our call, listed below, have now come true.

  • No rate rise
  • Hawkish statement
  • Split in the Fed
  • Market does not believe Fed’s hawkish statement

Serious Disconnect

After the Fed’s statement, a serious disconnect is developing as almost everything almost everywhere is rallying strongly.

Specific Position Update

Market reaction including money flows in various asset classes across the globe is showing a serious disconnect with BOJ, Fed and the real economy.  Under these circumstances, the best course of action is to temporarily do nothing and continue to monitor the new data.

In our over 30 years in the markets, one of the worst mistakes we have seen investors make is to become impatient and act with the momentum when conditions are not right as is the case now.

Markets

Our very, very short-term early stock market indicator is positive but can quickly turn negative.

Oil, currencies, bonds, gold, and other commodities are all running up everywhere across the globe.

Gold futures are at $1341, silver futures are at $20.03, and oil futures are $46.23.

S&P 500 resistance levels are 2165, 2200 and 2222; support levels are 2150, 2132, and 2120.

DJIA futures are up 69 points.

OUR CALL ON BOJ PROVEN SPOT ON, FED AHEAD, AMAZING GOLD GURUS AND OIL MOVES ON API

This is what you need to know today.

BOJ Decision

BOJ has decided to implement maturity range adjustment.

Spot On Call

We were one of the first ones to make the correct call.  We wrote,

The real story here is the Bank of Japan (BOJ) is highly likely to implement maturity-range adjustment; this is the big change ahead. In plain English, this means that the Bank of Japan is looking into buying more shorter-duration bonds and less longer-duration bonds.

Consensus Proven Wrong

Market consensus is proven wrong.  We previously wrote,

The Bank of Japan has a meeting on Sept. 20-21. Here is what you need to know.

  • The market consensus is that there will be a little bit more added to the existing negative-interest-rate/aggressive asset-buying program.
  • Money is made when market consensus is wrong and investors who are prepared for alternate scenarios jump on quickly.

In The Arora Report analysis, we believe there is about 60% probability that the market consensus might be wrong and the BOJ could implement maturity range adjustment.

Interest Rates

Market consensus was that Japan would go deeper into negative interest rates.  Our call was,

Negative interest rates have provided a big part of the fuel for stocks, bonds and precious metals. If the recent trend to move away from negative interest rates takes hold, ultra-bullish investors are in for a rude awakening.

At the close, 10-year Japanese government bond yield turns positive for the first time since March.

Stocks

Nikkei 225 climbed 1.91%.

87-stock Topics Banks Index surged 7%.

Our Portfolios

Our various portfolios have positions in two Japanese banks and four Japanese ETFs.

Our portfolios are positioned correctly for what BOJ actually did.

Specific Position Updates

We will be providing specific position updates and new positions in due course as appropriate.

There is a fly in the ointment that needs to be watched before updates are done. 

Fly In The Ointment

The fly in the ointment is yen.  Yen first weakened as would be expected.  Then market gurus whose forecasts have been proven wrong started coming out in force and doubling down on their wrong forecasts.   They are contending that in October or November BOJ will go deeper into negative interest rates.  This is causing yen to go higher as their followers buy yen and short Japanese stocks.  Since our portfolios are U. S. dollar based and yen is beginning to go higher, our subscribers may not get full 7% gains on bank stocks in our portfolio.  Our equity positions via ETFs are hedged.  Our short yen position may need adjustment if more followers of these gurus continue to disbelieve what BOJ actually did and continue to double down on the wrong forecasts.

Fed Ahead

FOMC rate decision will be announced at 2:00 pm ET.

Amazing Gold Gurus

The rally cry of the momo crowd gold gurus has been to buy gold due to negative interest rates.  One would think that as Japanese bonds move away from negative yields into positive yields, momo crowd gold gurus would admit they were wrong at least for their reason to buy gold.  However these gold gurus are amazing, they are out in force urging their followers to buy gold on BOJ action.  Their calls are totally nonsensical but their followers are aggressively buying gold and silver.

Oil Moves On API

API inventory came at -7.5 million vs. + 3 million consensus.  Oil is moving up on the news and trying to break out of $45 resistance.  EIA inventory data will be released at 10:30 am ET.

Markets

Our very, very short-term early stock market indicator is positive but can turn negative very quickly.

Bonds and currencies are mixed.

Gold futures are at $1329, silver futures are at $19.67, and oil futures are $44.86.

S&P 500 resistance levels are 2150, 2165 and 2200; support levels are 2132, 2120, and 2100.

DJIA futures are up 53 points.

STOCKS AND BONDS UP ON BOJ SPECULATION, OIL DOWN ON NIGERIA

This is what you need to know today.

Stocks and bonds are up worldwide on speculation about BOJ upcoming action.

Oil is falling as market comes to grips with increasing supply from Nigeria.

Expect markets to move during the day based on rumors about BOJ.

Markets

Our very, very short-term early stock market indicator is positive but can quickly turn negative.

Gold, silver and currencies are range bound.

Gold futures are at $1316, silver futures are at $19.20, and oil futures are $43.16.

S&P 500 resistance levels are 2150, 2165 and 2200; support levels are 2132, 2120, and 2100.

DJIA futures are up 63 points.

THREE IMPORTANT EVENTS AHEAD; FIGHTING IN LIBYA LEADS TO HIGHER OIL, STOCKS, AND GOLD

This is what you need to know today.

Three Important Events Ahead

Please see a separate post.

Fighting In Libya

Fighting in oil ports of central Libya, Sidra and Ras Lanuf,  is leading to higher oil prices.  Stocks, gold and silver are moving up with higher oil.  Momo crowd is aggressively buying silver.

Markets

Our very, very short-term early stock market indicator is positive but this can change to negative very quickly.

Currencies, interest rates and bonds are range bound.

Gold futures are at $1317, silver futures are at $19.25, and oil futures are $43.88.

S&P 500 resistance levels are 2150, 2165 and 2200; support levels are 2132, 2120, and 2100.

DJIA futures are up 71 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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