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

Churn

There is a benefit to a clear eyed fresh look at the stock market stripped of prior opinions. Anyone can do this with a simple chart.

Recently we wrote that the market was at a critical juncture. We have received many communications from investors amazed at how the market ran up to the line shown on the chart, pulled back and then moved up again right up to the line. After having witnessed firsthand the power of this simple chart, many have been asking for an update. Let’s explore with an updated chart.

Please click here for an updated chart of S&P 500 ETF (SPY). Please note the following from the chart:

• Market bulls are trying to beat the bears into submission.
• Bears look at the potential double top shown on the chart and stand their ground. A double top will be a big negative.
• The low volume shows that neither bulls nor bears have great conviction.
• The result of this bull bear battle is a churning market.
• Often in a situation like this, RSI is a helpful indicator. In this case, RSI can go either way.
• Divergence in RSI from the last peak shows that momentum has waned. This favors bears.
• Not shown on the chart but many other market internals we watch at The Arora Report favor the bulls.

• The pattern looks different for Dow Jones Industrial Average (DJIA), Nasdaq 100 ETF (QQQ) and small cap ETF (IWM).

As the market churns, the tiebreakers fall into the following three categories:

• The macro picture. On the positive side, trade war tensions are lessening. On the negative side, emerging market currencies are still roiled.
• Fundamentals. Based on the U. S. economy, fundamentals for the business being done in the United States remains strong. But fundamentals in China are weakening.
• Market leaders. Walmart (WMT) is resurgent. There is strong buying in Apple (AAPL). Amazon (AMZN) is churning. There is selling pressure in Facebook (FB), Google (GOOG) (GOOGL), Microsoft (MSFT) and Netflix (NFLX). Semiconductor group is deteriorating. Earning projections are poor from NVIDIA (NVDA) and Applied Materials (AMAT). Intel (INTC) and Micron (MU) are facing pricing pressures. AMD (AMD) remains a favorite of the momo crowd but smart money is selling it. Tesla (TSLA) stock is under pressure.

Investors should not make decisions based only on the chart and look at a more comprehensive model with a proven record in both bull and bear markets such as ZYX Global Multi Asset Allocation Model with 10 inputs. . Further, markets are dynamic and static models do not work over a long period. ZYX Global Multi Asset Allocation Model is adaptive in that it changes itself with market conditions.

Momo Crowd And Smart Money In Stocks

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

Turkey

The  Turkish lira is coming under pressure on Trump comments about additional sanctions if pastor Brunson is not released.

Gold

Gold is getting a slight respite as the dollar stops going up.

Oil

Trading in oil is listless in the absence of any major news.

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 $1184, silver futures are at $14.63, and oil futures are $65.52.

S&P 500 resistance levels are 2860 and 2918; support levels are 2800, 2765 and 2740.

DJIA futures are down 61 points.

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

Optimism On China Trade Talks

China is sending a high level delegation to Washington for trade talks.  This is creating optimism.

Momo Crowd And Smart Money In Stocks

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

Jobless Claims

Initial Claims came at 212K vs. 217K consensus. This is a leading indicator and carries a heavy weight in our model.

Housing Starts

Housing Starts came at 1168K vs. 1256K consensus.

Building Permits came at 1311K vs. 1316K consensus.

Gold

Gold is now trading at support of around $1180.  The momo crowd continues to aggressively sell gold.  Selling is especially vicious in gold and silver stocks.

The smart money is inactive.

Oil

Oil briefly broke below $65 before rebounding. Oil has been under pressure because of bearish inventory data. However oil may rally on optimism over trade talks.

Technical Patterns

S&P 500 traced a Hammer.  This is bullish.  The ETF of interest is SPY.

Natural gas stocks are tracing a Megaphone Top. This is bearish. The ETF of interest is FCG.

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.

Currencies are mixed.

Interest rates are ticking up and bonds are ticking down as money flows into stocks out of bonds.

Gold futures are at $1182, silver futures are at $14.56, and oil futures are $65.01.

S&P 500 resistance levels are 2840, 2860 and 2918; support levels are 2800, 2765 and 2740.

DJIA futures are up 195 points.

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

Recent events in Turkey have reminded many investors of the contagion risk coming to the stock market from abroad.

The biggest potential contagion risk to the stock market coming from abroad is 14 times bigger than Turkey and deserves investors’ attention. Let us explore with the help of two charts.

Please click here for the annotated chart of Mainland China ETF Xtrackers Harvest CSI 300 China A ETF (ASHR).

Please click here for the annotated chart of Chinese currency renminbi (CNH).

Please note the following:

• GDP of China is more than 14 times bigger than that of Turkey. Any potential contagion emanating from China will have significant impact on the U. S. stock market because of the size of the Chinese economy.
• Please note from the chart that in dollar terms, the Mainland Chinese market has dropped 31% from its peak.
• Please note from the chart that the Chinese currency, renminbi, is approaching the key level of seven renminbi to a dollar. If the key level on the chart is decisively broken, the U. S. stock market may come under significant pressure.
• While the Chinese stock market and currency have been falling, Dow Jones Industrial Average (DJIA), S&P 500 (SPX) as represented by ETF (SPY) and Nasdaq ETF (QQQ) have ignored the developments in China.   The reason is that the investors in the U. S. are focused on popular stocks such as Apple (AAPL), Amazon (AMZN), Google (GOOG) (GOOGL) and Facebook (FB); these stocks have been steadily going up holding up the indices. This is not likely to last if the Chinese stock market and currency keep on dropping.
• The damage in Mainland China ETF ASHR and China Hong Kong ETF iShares China Large-Cap ETF (FXI) is nowhere near the Turkey ETF iShares MSCI Turkey ETF (TUR). China is a completely different situation from Turkey. In Turkey there is a significant current account deficit and there are large borrowings in dollar. In China there is current account surplus and massive dollar reserves.

At The Arora Report we follow economic data from 23 countries. It is the situation in China that concerns us the most in terms of its impact on the U. S. stock market. The economic indicators in China are deteriorating fast. This does not mean that investors in the U. S. stock market should panic at this time. This is simply a call to be alert as the situation can worsen quickly.  The economic indicators in the U. S. are very positive and there are good reasons to be optimistic about the stock market.  Please pay attention to the ‘What To Do Now’ section below.

The reason to not panic is that the Chinese economy is a centrally controlled command economy. The Chinese government has many levers that can be pulled to temporarily stop the deterioration.

Turkey

Turkey is making it difficult to short sell lira.  This is helping calm the situation.

Retail Sales

Retails Sales Ex-auto came at 0.6% vs. 0.3% consensus. The U. S. economy is 70% consumer based.  For this reason it is important to pay attention to retail sales.  This is a very positive indication.

Momo Crowd And Smart Money In Stocks

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

Gold

Gold has fallen below $1200.  The momo crowd is aggressively selling.  The smart money is inactive.

Oil

API inventory data was bearish and has led to selling in oil.

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.

The dollar is stronger.

Interest rates are ticking down and bonds are ticking up.

Gold futures are at $1191, silver futures are at $14.75, and oil futures are $66.29.

S&P 500 resistance levels are 2840, 2860 and 2918; support levels are 2800, 2765 and  2740.

DJIA futures are down 159 points.

TURKEY STABILIZES AND MOMO BUYS, SILVER CRUSHED