WEEKLY MARKET DIGEST: DEPLOY CASH, FED AND ECB TURN DOVISH, GOLD OVER $1400, OIL ON IRAN $DIA $GLD $QQQ $SLV $SPY $TBT $USO

WEEKLY MARKET DIGEST: DEPLOY CASH, FED AND ECB TURN DOVISH, GOLD OVER $1400, OIL ON IRAN $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.

IRAN STRIKE ORDERED BUT REVERSED, GOLD OVER $1400

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

Iran

There are two independent reports that Trump ordered a strike against Iran, planes were in the air, and then the decision was reversed.

It appears that Trump is reluctant to militarily engage Iran.

Momo Crowd And Smart Money In Stocks

The momo crowd is selling stocks in the early trade after a record high yesterday.  Smart money is inactive.

Gold

Gold has crossed over $1400 due to Iran tensions.

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

Oil

Oil is rising on Iran.  The momo crowd is buying oil.  Smart money is inactive.

Marijuana

Canopy Growth (CGC) earnings were roughly in line with the consensus in terms of the overall picture but below the whisper numbers.  In the early trade, the momo crowd is selling marijuana stocks.  If the past pattern holds, momo crowd may switch to buying.

Smart money is inactive.

Technical Patterns

Semiconductor stocks are tracing a symmetrical continuation triangle. This is bullish.  ETF of interest is SMH.

Emerging markets are tracing a head and shoulders 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 negative.

Interest rates are ticking up and bonds are ticking down.

The dollar is slightly weaker.

Gold futures are at $1401, silver futures are at $15.35, and oil futures are $57.17.

S&P 500 resistance levels are 2950 and 3020; support levels are 2925, 2918 and 2860.

DJIA futures are down 57 points.

REDUCE CASH, THE CHART SHOWS DOW JONES TO 32,000 — BE BULLISH BUT CAUTIOUS IN THIS DRUNKEN PARTY

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

DJIA 32,000

By one measure, that often works, the stock market may be heading towards Dow Jones Industrial Average target of 32,000. Let’s explore with the help of a chart.

Please click here for annotated chart of Dow Jones Industrial Average (DJIA) ETF (DIA). Instead of Dow Jones Industrial Average, I prefer to use charts of S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ). However I have been getting a lot of requests to show a chart of Dow Jones Industrial Average. Please note the following:

  • When Dow Jones Industrial Average was at 16,000, I was the only one calling for Dow Jones Industrial Average at 30,000. Subsequently I have repeated the call several times.
  • The Fed did not cut interest rates but took a dovish stance by stating that it will cut interest rates if needed. It is the Fed’s job to cut interest rates when needed. Would any sane person have expected Fed to say anything different? However, the market is interpreting it as 100% certainty of rate cuts.
  • The market is optimistic about a trade deal with China when President Trump meets with President Xi of China next week at G20. At a minimum, the market is expecting a positive spin even if a deal is not reached.
  • The chart shows Arora buy signal which has now turned out to be the cycle low.
  • The stock market often, but not always, shows symmetry. This provides a good avenue to define measured targets.
  • For the stock market, the first target is Dow Jones Industrial Average at 29,000.
  • The second target for the stock market is Dow Jones Industrial Average at 32,000.
  • In absolute terms, the stock market is expensive on a fundamental basis. However, stocks compete with bonds. If interest rates fall further, at least in theory, higher valuations for the stock market can be justified.

Be Bullish But Cautious

Let’s bring some common sense to the forefront. Is there a free lunch here? The answer from the politicians, central bankers, stock market permabulls as well as from buy and hold mom and pop investors is a resounding ‘yes’.

What to do now depends on your belief in the free lunch. I for one do not believe in the free lunch. The debt bubble is getting bigger and will eventually burst. Many investors will get badly hurt. Think of it as a party where almost everybody is drunk and all the drunken people claim that nobody is drunk. I would suggest enjoying the party but being aware of the risks ahead. At The Arora Report we translate this into positions to buy, sell and hold through ZYX Asset Allocation Model with 10 inputs. Please click here to see the 10 inputs. The model produced a 45.90% return in 2008 — the last time the bubble burst. The model gave an aggressive buy signal in March of 2009 and has stayed bullish since then but at times, like now, with defensive measures such as proper allocations to cash and hedges. Moreover portfolio selection is also very important to control risks at this time.

Momo Crowd And Smart Money In Stocks

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

Gold

Gold is rocketing up on a weaker dollar.

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

Oil

Oil is rocketing as Iran shoots down a U. S. drone.

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

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.

Interest rates are ticking down and bonds are ticking up.

The dollar is weaker.

Gold futures are at $1384, silver futures are at $15.29, and oil futures are $55.69.

S&P 500 resistance levels is 3020; support levels are 2950, 2925 and 2918.

DJIA futures are up 234  points.

THE FED DAY, OPTIMISM OVER TRUMP AND XI MEETING, OIL INVENTORY

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

Fed Day

The Fed will announce its policy decision at 2:00 pm ET.  The press conference will start at 2:30 pm ET.

There is no change in the probabilities of a rate cut previously provided.

Trump Xi Meeting

There is optimism over the upcoming Trump and Xi meeting.  Yesterday the market quickly jumped over 200 points when Trump tweeted that he will meet Xi for an extended meeting at G20.

New Highs

Stock market bulls are hoping for a new stock market high today.

Momo Crowd And Smart Money In Stocks

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

Gold

There is no discernable smart money or momo crowd activity in gold.  Gold may move up if the Fed cuts the interest rate.

Oil

Oil has stabilized and moved up on API data as well as on optimism about Trump and Xi meeting.

API reported a draw of 812K barrels vs. consensus of 2 million barrel draw down. Even though on the surface this number is bearish, it was much better than the numbers in prior weeks.

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

Marijuana

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

Technical Patterns

China Hong Kong shares are tracing a head and shoulders bottom.  This is bullish.  ETF of interest is FXI.

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 and will depend on the Fed decision.

Interest rates are ticking up and bonds are ticking down.

The dollar is slightly weaker.

Gold futures are at $1346, silver futures are at $14.96, and oil futures are $54.17.

S&P 500 resistance levels are 2950 and 3000; support levels are 2918, 2860 and 2840.

DJIA futures are up 9  points.

TRUMP BLASTS DRAGHI AHEAD OF POWELL — POTENTIAL FOR A BIGGER BUBBLE

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

Dovish Draghi — Bubble

European Central Bank President Mario Draghi turned ultra-dovish in his speech. Draghi is almost pre-committing to more monetary stimulus as risks rise. Is this a motivation for Fed Chairman Powell and his cohorts at the Fed to cut interest rates?

President Trump has blasted Draghi because stimulus in Europe means lower euro giving an edge to European companies in their exports to the U. S. Let’s explore the good and the bad of these moves for stocks with the help of a chart.

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

  • Stocks compete with bonds. Bonds rise when interest rates go lower.
  • Lower interest rates are likely good for stocks in the short term.
  • The bubble is already developing in debt, both government and private.
  • Lower interest rates will simply enlarge the bubble.
  • Bubbles eventually burst. Of course, it is difficult to call when this bubble will burst.
  • The chart shows resistance.
  • Resistance becomes support when the price crosses above it.
  • RSI on the chart shows there is room for stocks to run.
  • Volume shown on the chart is relatively low. This indicates that there is not high conviction in this rally.
  • Irrespective of significant risks, popular large cap tech stocks such as Facebook (FB), Google (GOOG) (GOOGL), Amazon (AMZN) and Apple (AAPL) are running up. Investors find it easy to park money in these highly liquid stocks.
  • There are short squeezes in new IPO stocks such as Beyond Meat (BYND, Fiverr International (FVRR), CrowdStrike (CRWD) and Zoom Video Communications (ZM).

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 rocketing up on dovish Draghi.  The momo crowd is aggressively buying gold.  Smart money is inactive.

Oil

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

Marijuana

The momo crowd is 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 positive.

Interest rates are ticking down and bonds are ticking up.

The euro is weaker.

Gold futures are at $1355, silver futures are at $14.97, and oil futures are $52.34.

S&P 500 resistance levels are 2918, 2925 and 2950; support levels are 2860, 2840 and 2800.

DJIA futures are up 134 points.

SIGNIFICANT FED DECISION AHEAD — REVIEW CASH AND HEDGES

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

Significant Fed Decision

Fed meeting will start tomorrow.  The Fed will announce its decision on Wednesday.

The Fed decision has the potential to have a major impact on your portfolio.

In our analysis, here are the probabilities.

  • 15% — The Fed will cut rates.  Depending upon the language, the market can go up or go down.
  • 50% — The Fed will hint at cutting rates later.  Depending upon the language, the market can experience a significant up move.
  • 25% — The Fed will walk the market back on rate cuts. (In plain English, the market is wrong about aggressive  interest rate cuts.)  The market may experience a significant down turn.
  • 10% — other

In addition there are many other nuances that may affect the market response.

It is prudent for investors to review their cash and hedges based on risk preference.  If you are aggressive and are close to the higher end of cash and hedges, you may consider reducing cash and hedges within the range given in the What To Do Now section.

If you are conservative and are closer to the lower end of the range, you may consider increasing cash and hedges within the range given in the What To Do Now section.

For some investors, the prudent strategy may be to do nothing until the Fed decision and the market reaction is known.

In making a decision, consider that the G20 meeting is later in the month.  If Trump and Xi strike a deal, the market will go up.  If there are no further talks and there is no deal, the market will fall.  It is potentially a binary situation.

Momo Crowd And Smart Money In Stocks

There is no discernable momo crowd or smart money activity in stocks.

Gold

The momo crowd is acting like a yo-yo in gold.  Smart money is inactive.

Oil

Everything depends on what OPEC+ will do next. If there is no OPEC deal and there is no trade deal with China, oil can fall into the $30 range.  On the other hand if OPEC has a deal and there is a trade deal, oil can easily run up to $70.

The momo crowd is acting like a yo-yo.  Smart money is inactive.

Marijuana

There is no discernable smart money or momo crowd activity in marijuana.

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 and can easily swing either way based on rumors about the Fed and trade.

Interest rates and bonds are mixed.

The dollar is weaker.

Gold futures are at $1342, silver futures are at $14.84, and oil futures are $52.27.

S&P 500 resistance levels are 2918, 2925 and 2950; support levels are 2860, 2840 and 2800.

DJIA futures are down 6  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% – 30% and short to medium-term hedges of  5% – 15% and short term hedges of 5% – 15%.

 

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.

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