WEEKLY MARKET DIGEST: BIG SELLERS IN TECH STOCKS, ARORA PORTFOLIOS CORRECTLY POSITIONED $DIA $GLD $QQQ $SLV $SPY $TBT $USO

WEEKLY MARKET DIGEST: BIG SELLERS IN TECH STOCKS, ARORA PORTFOLIOS CORRECTLY POSITIONED $DIA $GLD $QQQ $SLV $SPY $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.

JUST RELEASED GDP DATA SHOWS STRONG ECONOMY, POSITIVE SENTIMENT, PEACE IN KOREA

To gain an edge, this is what you need to know today.

GDP

GDP-Advanced came at 2.3% vs. 2.1% consensus.

Employment Cost Index came at 0.8% vs. 0.7% consensus.  This data indicates that the economy remains strong.

Positive Sentiment

Good earnings from INTC, MSFT and AMZN are lifting the sentiment.

Momo Crowd And Smart Money

The momo crowd is aggressively buying in early trade.  The smart money is very lightly selling into the strength.

This morning, there appear to be some big sellers selling into rallies.  It is not clear who these sellers are and why they are selling.  Here is the most important question, “Are they done selling or will they continue selling after the market opens?”

Gold

The momo crowd is lightly buying gold.  The smart money is inactive. In theory, stronger GDP should put downward pressure on gold.

Oil

Oil is range bound.  Often on Fridays, we see a short squeeze moving oil higher.

Peace In Korea

The leaders of two Koreas met. They have agreed to end the seven decade war. On the surface, this seems to provide a great investing opportunity in Korea. However investing is not that simple. Please see the prior detailed post in ZYX Emerging on the topic.

Technical Patterns

Emerging markets are tracing an Island Bottom.  This is bullish.  ETF of interest is EEM.

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 depends on the sellers described above.

Currencies and interest rates are range bound.

Gold futures are at $1319, silver futures are at $16.57, and oil futures are $67.90.

S&P 500 resistance levels are 2688, 2700 and 2740; support levels are 2661, 2631, and 2615.

DJIA futures are down 43 points.

DOVISH ECB AND FB EARNINGS IMPROVE THE SENTIMENT TOWARDS STOCKS

To gain an edge, this is what you need to know today.

Dovish ECB

European Central Bank (ECB) leaves policy unchanged as it believes that the current economic expansion may be moderating. This is indeed good news for stock investors concerned about rising interest ratesIf economic expansion moderates as ECB believes it will, interest rates will not go up as fast as currently anticipated.

ECB will continue its QE program of buying 30 billion euros of assets a month at least until the end of September.  Again this is good news for stock investors.

Bonds Improve

After several days of losses, this morning bonds are finally improving as interest rates are ticking down.

The U. S. Treasury sold $35 billion of five-year notes at a yield of 2.837%.  This is the highest yield since September 2008.  In yesterday’s Morning Capsule we had suggested keeping an eye on this auction.  The auction turned out to be in line with expectations. For this reason there is no major impact on the market.

Smart Money And Momo Crowd

Smart money is mostly inactive with the exception of light buying in Facebook (FB) and select semiconductor stocks.  The momo crowd is aggressively buying stocks in the early trade.

Facebook Earnings

In the Morning Capsule, we specifically write about a certain stock only when it is having a significant impact on the overall market.  This is the case this morning with Facebook earnings.  Facebook reported blowout earnings. The earnings were better than the consensus numbers and significantly better than the whisper numbers. Going into the earnings, whisper numbers were worse than the consensus numbers on concerns related to privacy issues and data breach.  Other usage metrics look great.   As a full disclosure, FB has been a long term position in ZYX Buy initially bought with an average price of $49.92. Subsequently buy zones have been raised for new subscribers. There will be a new post on FB in ZYX Buy later today.  FB is trading at $172.62 in the premarket.

This is causing sentiment to shift positive for the overall market and especially technology stocks.

To add fuel to the fire, based on new earnings, sentiment on semiconductor stocks is shifting positive.

Gold

Light buying is coming into gold in the early trade by the momo crowd.  The smart money is inactive.

Oil

Oil is moving higher on concerns that Trump will pull out of the Iran nuclear deal.  Iran is a major oil producer.

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 positive but can quickly turn negative.

The dollar is slightly weaker.

Gold futures are at $1324, silver futures are at $16.58, and oil futures are $68.69.

S&P 500 resistance levels are 2661, 2688 and 2700; support levels are 2631,  2615 and 2600.

DJIA futures are up 58 points.

PORTFOLIOS CORRECTLY POSITIONED AFTER THE ‘OUTSIDE DAY’ THAT JUST OCCURRED, NEXT TEST AT 1:00 PM

To gain an edge, this is what you need to know today.

The Outside Day

The Arora Report portfolios are correctly positioned after the ‘outside day’ that just occurred.  Please pay attention to the ‘What To Do Now’ section below. In traditional technical analysis, the outside day is considered an ominous pattern by less experienced analysts. However when taken in the broader context including fundamentals and the macro picture, it is worth paying attention to.

Please click here for an annotated chart of S&P 500 ETF (SPY). Some similar conclusions can be drawn from charts of Dow Jones Industrial Average (DJIA), Nasdaq 100 ETF (QQQ) and small cap ETF (IWM). Please observe the following from the chart:

  • The ominous pattern is the ‘outside day’ as shown on the chart. In an outside day, the high is higher than the previous day and the low is lower than the previous day. The chart does not include pre-market data. In the pre-market, S&P futures (ESM8) were much higher than the ETF SPY shown on the chart for regular hours.
  • The point of the outside day is that it started with a lot of optimism over good earnings and ended with a lot of pessimism on the theory that the earnings may have peaked.
  • Many gurus are attributing the outside day to the 10-year Treasury yield reaching 3%. However, yields were approaching 3% the day before and in the morning when futures were much higher. The trigger for the selloff was a comment on the Caterpillar (CAT) conference call (please see yesterday’s Afternoon Capsule) and lower than expected earnings from 3M (MMM).
  • The outside day like the one that was traced is a bearish pattern.
  • As the chart shows, the selling occurred on relatively low volume. This indicates that the necessary cleansing is not yet done.
  • The outside day has occurred in the context of a broader consolidation pattern shown on the chart. The consolidation pattern is forming a triangle. In the present context, the probability of the market breaking outside of the consolidation pattern to the upside is only slightly less than the probability of the market breaking to the downside.
  • RSI is neither overbought nor oversold.

Momo Crowd And Smart Money

The momo crowd has been all over the place and getting whipsawed in the early trade this morning.

Smart money is mostly inactive but there has been sporadic light buying in select stocks.

The Next Test At 1:00 PM

The next test will come at 1:00 pm ET.  This is when the U. S. government will auction $35 billion of five year notes.  If the auction is well received, expect interest rates to pull back and stocks to go higher. Of course, if the auction is not well received, expect interest rates to go higher and the stock market to take a leg lower.

The probability of the auction being  received well is higher compared to not being received well.  But there are no guarantees.

Gold

Gold continues under pressure due to a strong dollar.

Oil

The smart money sold oil near the highs but the momo crowd continues to buy.

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 quickly swing either way.

Interest rates are ticking up and bonds are ticking down.

Gold futures are at $1321, silver futures are at $16.51, and oil futures are $67.57.

S&P 500 resistance levels are 2631, 2661 and 2688; support levels are 2615, 2600 and 2575.

DJIA futures are up 28  points.

POSITIVE SENTIMENT ON GOOD EARNINGS BUT RISING INTEREST RATES A CONCERN

To gain an edge, this is what you need to know today.

Positive Sentiment On Earnings

Earnings season is in full swing.  So far, on the average, earnings are better than the consensus but in line with the whisper numbers. This is generating positive sentiment in stocks this morning.

Interest Rate Concerns

Yield on the 10-year Treasury bond continues to hover around 3%.  3% is the key level. This is causing concern.

Momo Crowd And Smart Money

The momo crowd is aggressively buying stocks in the early trade.

Smart money is inactive.

Gold

Gold continues to stay under pressure as the dollar is holding gains. Gold is priced in dollars. For this reason, a stronger dollar often means weaker gold.

The momo crowd continues to sell gold. The smart money is inactive.

Oil

Oil continues to levitate due to Libya issues described in the Morning Capsule yesterday.

The momo crowd continues to aggressively buy oil.  Smart money is selling oil into the strength.

Technical Patterns

Vietnamese shares are tracing a Megaphone Top. This is bearish. ETF of interest is VNM.  As a full disclosure, The Arora Report sold the entire long held VNM position right at the peak before the pull back.

Consumer stocks are tracing a Hammer. This is bullish.  ETF of interest is XLP.

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 positive but can quickly swing negative.

Gold futures are at $1327, silver futures are at $16.59, and oil futures are $68.93.

S&P 500 resistance levels are 2700, 2740 and 2765; support levels are 2661, 2631, and 2615.

DJIA futures are up 121 points.

THE KEY INTEREST RATE NEARS 3% — STOCK INVESTORS NEED TO BE SELECTIVE, GOLD FALLS ON STRONGER DOLLAR

To gain an edge, this is what you need to know today.

Key Interest Rate

One of the key interest rates that investors need to pay attention to is the yield on 10-year U. S. Treasury bonds.  The yield is approaching 3%.  As a reference, in 2012 and 2016 the yield dipped below 1.5%.  In 2013 and 2014, the yield approached 3% but then backed off.

Competition For Stocks

Bonds provide competition for stocks. As the yield goes higher, existing investors in bonds lose money.  But new investors find bonds more attractive. Less money flows into stocks and more into bonds if yield stays high.

It is important for investors to be highly selective in what they buy and hold. The days of just buying anything without proper guidance and seeing the market go up may be over.

Momo Crowd And Smart Money

The smart money is inactive. The momo crowd is buying.

Gold

Gold is falling as the dollar strengths.  Dollar is strengthening because of higher interest rates.

The momo crowd is aggressively selling. The smart money is inactive.

Oil Rises On Libya

Libya is a major oil producer. There is a report that Libya’s strong man, General Haftar, has had a stroke.  If chaos breaks out in Libya and oil production stops, oil can rocket towards $100.

The momo crowd is aggressively buying oil.

Technical Patterns

Silver is tracing an Inside Bar. This is bearish. ETF of interest is SLV.

Semiconductors are tracing a Diamond Top. This is bearish. ETF of interest is SMH. However, be aware that semiconductors have been one of the strongest sectors in this bull market.  As long as the bull market is intact, any correction will provide a buying opportunity.

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 quickly swing either way.

Gold futures are at $1327, silver futures are at $16.78, and oil futures are $67.41.

S&P 500 resistance levels are 2688, 2700 and 2740; support levels are 2661, 2631, and 2615.

DJIA futures are up 48 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% – 37% and short to medium-term hedges of  15% – 25% and very short term hedges of 16%.

 

A knowledgeable investor would have turned $100,000 into over $1,000,000 with the help from The Arora Report. NOW YOU TOO CAN ALSO SPECTACULARLY SUCCEED AT MEETING YOUR GOALS WITH THE HELP OF THE ARORA REPORT. You are receiving less than 2% of the content from our paid services. …TO RECEIVE REMAINING 98% INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES, TAKE A FREE TRIAL TO PAID SERVICES.

Please click here to take advantage of a FREE  30 day trial.

Check out our enviable performance in both bull and bear markets.

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