WEEKLY MARKET DIGEST: AUTHOR OF ‘DEATH BY CHINA’ TO HEAD TRUMP COUNCIL. STOCKS BOUGHT, GOLD SOLD, RAISE CASH $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO

WEEKLY MARKET DIGEST: AUTHOR OF ‘DEATH BY CHINA’ TO HEAD TRUMP COUNCIL. STOCKS BOUGHT, GOLD SOLD, RAISE CASH $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.

AUTHOR OF ‘DEATH BY CHINA’ TO HEAD TRUMP TRADE COUNCIL, GOOD ECONOMIC DATA, OIL VOLATILE BUT GOLD LACKLUSTER

This is what you need to know today.

Death By China

Trump has picked Peter Navarro to head the newly formed National Trade Council.  Navarro is a known China hawk.  He previously wrote a book titled, ‘Death By China.’

It is being said that this appointment increases the probability of a trade war.  A trade war would end the levitation of this stock market.  Trump supporters disagree.

In our analysis, it is too early to tell.

Good Economic Data

Q3 GDP – third estimate came at 3.5% vs. 3.3% consensus.

Durable Orders Ex-trans came at 0.5% vs. 0.2% consensus.

Initial Jobless Claims came at 275K vs. 256K consensus.  As a reminder, our models look at a three month moving average of this number.

Oil

Oil fell yesterday after EIA showed that inventories rose more than the consensus.  This morning oil is being aggressively bought.  The trigger for buying is a statement from OPEC that global oil markets should rebalance between Q1 and Q2 2017.

Gold

Gold and silver are lackluster.

Markets

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

Currencies, interest rates and bonds are range bound.

Gold futures are at $1129, silver futures are at $15.84, and oil futures are $52.33.

S&P 500 resistance levels are 2288, 2300 and 2334; support levels are 2250, 2222, and 2200.

DJIA futures are down 6  points.

RAISE CASH AND INCREASE HEDGES, OIL INVENTORIES FALL, GOLD RISES

This is what you need to know today.

Increase Cash

There is a distinct possibility of some tax related selling after the first of the year.  On the flip side, the Trump honeymoon is likely to continue.

Last three Januaries have been bad.  However to find a historical precedence of four bad Januaries, we have to go back to the 1950s.

We reduced cash and hedges the day after the election.  Given the run up, it is simply prudent to take advantage of the strength to raise more cash and put on more hedges between now and the end of the year.

A special note to new subscribers: as much as possible, try to sell into the strength and buy into the weakness.  You need to be holding some cash to buy into the weakness when ever it occurs.

Please scroll down to “What To Do Now” for details.

Oil

Oil is rising.

API data shows crude inventories fell 4.2 million barrels vs. 2.4 million barrels consensus.

EIA data will be released at 10:30 am ET.  EIA data is considered more authoritative and it may be a market mover.

Gold

Gold is moving up as dollar retreats from a 14 year high.  The buying is mostly by the momo crowd.  There is no buying by the ‘smart money’.

Demand for physical gold continues to decline.

Markets

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

Interest rates and bonds are range bound.

Dollar is pulling back from a 14 year high.

Gold futures are at $1137, silver futures are at $16.14, and oil futures are $53.44.

S&P 500 resistance levels are 2288, 2300 and 2334; support levels are 2250, 2222, and 2200.

DJIA futures are up 17 points.

STOCKS BOUGHT AND GOLD SOLD IN THE FACE OF ASSASSINATION AND TERROR, BOJ, JANUARY EFFECT AND SPECIAL CLOSED END PORTFOLIO OPPORTUNITIES COMING BUT DELAYED

This is what you need to know today.

Assassination

Russian ambassador to Turkey has been assassinated by an off duty Turkish policeman.  The gun man shouted, “Do not forget Aleppo.”  For the longest time Aleppo was the stronghold of the opposition in Syria.  Recently with the help of Russia, the government in Syria has captured Aleppo.  Russia and Turkey have pledged détente.

Terror

A terrorist attack with a truck killed 12 in Berlin’s Christmas market.

Stocks Bought

There were slight dips after both incidents but performance chasing money managers aggressively bought both dips.

Gold Sold

Gold spiked up after news of each incident.  The up spikes in gold have been aggressively sold.

BOJ

Bank of Japan, after its first meeting since Trump’s election, left policy unchanged but upgraded assessment of the economy.

January Effect

The January Effect offers an opportunity to potentially make about 30% in three months.  In some years, returns have exceeded 150% annualized.  It is a phenomenon that makes prices of certain stocks rise more in January than the market averages.

Over the last 30 years, we have made money from the January Effect about 75% of the time, broken even about 10% of the time, and lost money about 15% of the time.

We have the list ready but publication continues to be delayed since the market is not experiencing any significant down days.  We need this data to properly calculate the buy zones. We are still planning to publish this list but are planning to patiently wait until buy zones can be properly calculated.

Closed End Special Portfolio

Over the years, The Arora Report subscribers have made a ton of money from our special closed end fund portfolios.  The advantage of the closed end funds is that they trade like ETFs but often we are able to buy them at a discount to net asset value.   Discounts tend to widen close to the year end and also when a certain sector becomes unpopular.

When a previously in-favored sector returns to favor, closed end funds often trade at a premium to net asset value.

Over the years, we have repeatedly bought closed end funds at deep discounts to net asset value and often sold them at premiums to net asset value.  This process adds substantially to the returns.  Example of 42% capital gains in addition to 12% dividends for 2016 Special Closed End Portfolio is right in front of you.

We have the list ready but publication continues to be delayed since the market is not experiencing any significant down days.  We need this data to properly calculate the buy zones. We are still planning to publish this list but are planning to patiently wait until buy zones can be properly calculated.

Markets

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

Oil is being bought and natural gas is being killed.

Yen had experienced buying after the assassination but the strength was sold.

Interest rates and bonds are range bound.

Gold futures are at $1130, silver futures are at $15.73, and oil futures are $53.61.

S&P 500 resistance levels are 2288, 2300 and 2334; support levels are 2250, 2222, and 2200.

DJIA futures are up 52 points.

TRUMP CHINA DRONE DANCE, BEWARE OF LOW LIQUIDITY, AND GOLD HOLDS CHINA GAINS

This is what you need to know today.

Trump China Drone Dance

On Friday, China seized an American underwater drone.  China is returning the drone.  There is a serious concern in Asia that the Obama administration was not able to devise a stronger response to China especially since the incident occurred in international waters closer to the Philippines.

Trump tweeted that China can keep the drone.  It has been stated that the drone is not classified and costs only $150,000.  Of course there is no way to verify.

Friday markets were shaken over the news but now they are breathing a sigh of relief with the exception of the gold market.

Low Liquidity

In between now and 2017, there will low liquidity in the markets.  Low liquidity allows professional traders to swing certain stocks and commodities wildly.  In plain English it means to consider not buying on rips and not selling on riffs unless there is a strong fundamental reason to do so.

Gold Holds Gains

Gold ran up Friday on China news.  Gold is holding the gains as there is slight weakness in dollar.

There is no buying by the ‘smart money’ in gold.

Oil

Hedge funds are increasing long bets on oil.

For liquidity reasons, we are switching over to February contract.

Markets

Our very, very short-term early stock market indicator is neutral but the market can be volatile due to low liquidity.

Dollar is losing its upward momentum.

Interest rates are ticking down and bonds are ticking up.

Gold futures are at $1140, silver futures are at $16.06, and oil futures are $52.77.

S&P 500 resistance levels are 2288, 2300 and 2334; support levels are 2250, 2222, and 2200.

DJIA futures are up 7  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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