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

China Stocks

Shanghai Composite Index fell as much as 2.8%. The primary driver of the fall is selling in suppliers to Huawei (please see yesterday’s Morning Capsule.)

Yuan, Chinese currency, fell to its lowest level against the dollar since November.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively selling stocks in the early trade.  Smart money is inactive.

Gold

The momo crowd is lightly selling gold.  Smart money is inactive.

Oil

The momo crowd is buying oil.  Smart money is lightly selling oil.

Marijuana

The momo crowd is lightly buying marijuana stocks.  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 negative.

Bonds are ticking up and interest rates are ticking down.

The yuan is weak, dollar is range bound against other currencies.

Gold futures are at $1286, silver futures are at $14.43, and oil futures are $63.43.

S&P 500 resistance levels are 2860, 2918 and 2925; support levels are 2840, 2800 and 2765.

DJIA futures are down 186 points.  

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

Trump Save

Think what you may of President Trump, there is an undeniable fact. If you watch the markets as closely as I do, you would have noticed that Trump often has impeccable timing to prop up the stock market. The timing of his latest announcement hit the bull’s eye. Let’s explore with the help of a chart.

Please click here for the annotated chart of S&P 500 ETF (SPY). Similar conclusions can be drawn from the charts of Dow Jones Industrial Average (DJIA). Please note the following:

• The chart shows the stock market was going lower.
• VUD indicator, the most sensitive indicator of supply and demand in real time, was orange as shown on the chart indicating supply of stocks exceeded demand.
• The set up was near perfect for the stock market to have kept going down.
• Trump perfectly timed announcement of a delay in tariffs on autos and auto parts.
• As the chart shows, a sharp rally ensued.
• Even the stock of Apple (AAPL) rallied. Apple presents significant China related risk.
• Semiconductor stocks that also represent China risk such as Intel (INTC), AMD (AMD) and Micron (MU) also rallied.
• Popular stocks that do not have material exposure to China such as Google (GOOG) (GOOGL), Amazon (AMZN) and Facebook (FB) staged stronger rallies.

Take Trump’s Power With A Grain Of Salt

The prevailing wisdom is that there is a Trump put under the market. In plain English, this means that there is a belief that the market will not go down because Trump is always able to prop it up.

For the most part, so far this belief has proven to be correct but there are exceptions. Does anyone remember December 2018? Investors ought to take the Trump put with a grain of salt.

Order Against Huawei

Trump has issued an executive order targeting the giant Chinese supplier of telecom equipment Huawei. This will prevent American semiconductor companies such as MU, QRVO and QCOM from selling to Huawei. Expect weakness in semiconductor stocks.

Jobless Claims

Initial Jobless Claims came at 212K vs. 222K consensus.

Housing Starts

Housing Starts came at 1235K vs. 1200K consensus.

Building Permits came at 1296K vs. 1280K consensus.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying stocks in the early trade.  Smart money is slightly selling stocks in the early trade.

Gold

The momo crowd is aggressively selling gold.  Smart money is inactive.

Oil

The momo crowd is aggressively buying oil.  Smart money is inactive.

Marijuana

The momo crowd is buying marijuana stocks.  Smart money is inactive.

Technical Patterns

Australian stocks are tracing an outside bar. This is bullish.  ETF of interest is EWA. However be extremely cautious because an up move may not materialize due to China related issues.

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 expect the market to open significantly higher.

Bond rally is pausing.  Interest rates are ticking up and bonds are ticking down.

The dollar is slightly stronger.

Gold futures are at $1290, silver futures are at $14.73, and oil futures are $62.86.

S&P 500 resistance levels are 2860, 2918 and 2925; support levels are 2840, 2800 and 2765.

DJIA futures are up 85 points. 

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

Twist On Chinese Data

In China, retail sales came at 7.2% vs. 8.6% consensus.  This is the weakest number since 2003.

Industrial output in China came at 5.4% vs. 6.5% consensus.

Investors should note that the weakness in data is from before Trump increased tariffs.

Investors are putting a bullish twist on the data.  The twist is the weakness will cause Chinese government to provide more stimulus and buy more stocks.

Weak Retail Sales

The U. S. economy is about 70% consumer based.  For this reason investors ought to pay attention to retail sales.

Retail Sales Ex-auto came at 0.1% vs. 0.6% consensus.  We exclude auto because the volatility in autos creates noise that hinders projections.

Momo Crowd And Smart Money In Stocks

The momo crowd is selling stocks.  Smart money is inactive.

Gold

Gold is seeing safe haven demand as stocks drift lower.

The momo crowd is buying gold. Smart money is inactive.

Oil

IEA lowers its demand forecast for oil; projections are for especially weaker demand in China, Brazil and Japan.

API data showed a build of 2.6 million barrels vs. a consensus of a draw of 2.1 million barrels.

Oil prices are falling on the foregoing two items.

EIA data will be released at 10:30 am ET and may spark a rally if it is neutral to bullish.

The momo crowd is selling oil.  Smart money is inactive.

Marijuana

TLRY and ACB reported earnings.  Both earnings were roughly in line with the consensus but below whisper numbers.  The momo crowd has been acting like a yo-yo since the earnings release.  Smart money has been lightly selling on up spikes.

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 but can easily swing based on tweets and news.

Interest rates are ticking down and bonds are ticking up.

The dollar is stronger.

Gold futures are at $1301, silver futures are at $14.81, and oil futures are $61.09.

S&P 500 resistance levels are 2840, 2860 and 2919; support levels are 2800, 2765 and 2740.

DJIA futures are down 167 points.          

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

Bounce From Oversold Condition

The stock market is oversold.  Oversold markets tend to bounce.  This is exactly what is happening this morning.

In our analysis, the rally is likely to fail without comments from Trump and China.  Expect both countries to make positive comments to prop up their stock markets.

Momo Crowd And Smart Money In Stocks

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

Gold

Gold is not seeing follow through from yesterday.  The momo crowd is selling gold.  Smart money is inactive.

Oil

There has been a drone attack on a Saudi pumping station.  This follows sabotage of two Saudi tankers.

There is no discernable momo crowd or smart money activity in oil in the early trade.

Marijuana

The momo crowd is buying marijuana stocks.  Smart money is inactive.

Technical Patterns

Materials stocks are tracing a megaphone top. This is bearish. ETF of interest is XLB.

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.

Interest rates and bonds are range bound.

The dollar is stronger.

Gold futures are at $1299, silver futures are at $14.84, and oil futures are $61.72.

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

DJIA futures are up 108 points.

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

President Trump has a new calculation relating to his reelection and China tariffs. The calculation centers around a potential ‘President Biden.’

Many investors have not caught on to the new calculation and are stuck in the old paradigm. Such investors need to wake up. Let’s explore with the help of two charts.

Please click here for an annotated chart of ETF (DIA) which represents Dow Jones Industrial Average (DJIA).

Please click here for an annotated chart of ETF (SPY) that represents S&P 500 index (SPX). For the sake of full transparency, this is exactly the same chart that was previously published without any changes. Similar conclusions can be drawn from the charts of Nasdaq 100 ETF (QQQ) and small-cap ETF (IWM).

Please note the following:

• The first chart shows the comment by the administration that talks with China were constructive. Stock market staged a very strong rally based on this vague comment. Later on there were more vague positive comments coming from the administration regarding China trade talks.
• The VUD indicator acts like an x-ray of the market. The VUD indicator is the most sensitive measure of supply and demand in the stock market in real time. Orange on the chart shows net supply. In plain English, as the stock market staged a strong rally, there was net selling in the stocks.
• The chart shows that smart money was also selling into the rally.
• The rally was caused by aggressive buying by the momo (momentum) crowd. The momo crowd is not known for deep analysis. The momo crowd bought oblivious to the new Trump calculation regarding his reelection hinging on potential ‘President Biden.’
• The second chart was published before the breakdown of trade talks. The chart shows two potential traps — a bull trap and a bear trap.
• The potential bull trap is characterized by the breakout of stock prices above the green line shown on the chart.
• The potential bear trap is shown by stock prices falling below the orange line shown on the chart.

The New ‘President Biden’ Calculation

President Trump tweeted, “China is DREAMING that Sleepy Joe Biden, or any of the others, gets elected in 2020. They LOVE ripping off America!”

The previous calculation was that President Trump needed the China trade deal for his reelection and for this reason a trade deal was imminent. Short sighted investors were even rooting for a softer trade deal that would have not been good for the United States in the long term. You may recall that The Arora Report took the position that investors should be concerned about both the upside and the down side in the stock market as a China deal was not a sure thing like the stock market was assuming.

Here is the new calculation regarding the reelection.

• If President Trump were to strike a soft deal with China, Democrats will use it to their advantage. Biden may be especially effective in attacking President Trump on a soft China deal.
• On the other hand, if President Trump takes a hard line with China, he can send a clear message to his base that China is waiting for President Biden so that they can get a better deal.
• Trump is a master of messaging.
• He won the last election by intuitively tuning into the anger among a certain part of the American public.
• Now Trump is again tuning into sentiment among the American public that China has taken advantage of the United States.
• The new calculation is that a ‘no trade deal’ with China helps Trump get reelected against Biden; whereas a softer trade deal with China may truly result in Biden becoming the president.

Popular Stocks 

Investors should review their positions in stocks with direct exposure to China such as Apple (AAPL), Starbucks (SBUX), Nike (NKE) and Boeing (BA). Semiconductor stocks such as AMD (AMD), Micron Technology (MU) and NVIDIA (NVDA) are vulnerable. Intel (INTC) is less vulnerable because the stock has already fallen.

Popular Chinese stocks such as Alibaba (BABA) and JD.com (JD) represent higher risk.

Companies with little direct exposure to China such as Amazon (AMZN), Facebook (FB) and Google (GOOG) (GOOGL) may fair better.

Probabilities

Investors ought to pay attention to Arora’s Third Law of Investing and Trading: Making investing and trading decisions based on probabilities is the only realistic and profitable approach. Here are the latest probabilities:

• Bull trap coming true: 40%
• Bear trap coming true: 25%
• Whipsaws: 35%

In plain English, this means that there is a 40% probability of the market going lower after the initial down spike.  In addition, note higher probability of whipsaws.  These probabilities will provide significant opportunities for investors, both long term and short term.  Please be sure to follow the system.

Portfolio Protection

At The Arora Report, portfolios were well protected with cash and hedges before the downturn in the stock market that started a week ago. Immediately after the Trump tweet, when the market was higher, we increased protection. Now we are further increasing protection. Please see the ‘What To Do Now’ section below.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively selling.  Smart money is inactive now but sold into the rally on Friday as shown on the chart linked above.

Gold

Gold is seeing aggressive buying by the momo crowd and light buying by smart money.

Oil

Oil is seeing aggressive buying by both the momo crowd and smart money.

Marijuana

The momo crowd is buying marijuana stocks in the early trade.  Smart money is inactive.

Technical Patterns

Saudi Arabian shares are tracing a hammer.  This is bullish.  ETF of interest is KSA

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, bonds and currencies are very volatile.

Gold futures are at $1295, silver futures are at $14.75, and oil futures are $63.11.

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

DJIA futures are down 515 points.