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.
EARNINGS DISAPPOINT BOTH BULLS AND BEARS, MEDICAL MARIJUANA EXPORT TO THE U. S., MOVE IN GOLD
To gain an edge, this is what you need to know today.
Earnings
So far earnings are mixed. They are disappointing both bulls and bears.
Momo Crowd And Smart Money In Stocks
The momo crowd is buying stocks in the early trade. Smart money is selectively selling high beta stocks.
Gold
Momentum on gold has reversed. This is bringing in aggressive momo crowd buying. Momo crowd buying is especially strong in silver and miners. Smart money is inactive.
For longer term, please see gold and silver ratings.
Oil
Short squeeze in oil continues but is also showing early signs that this leg is about to end. The momo crowd is aggressively buying oil. Smart money is lightly selling oil.
For longer term, please see oil ratings.
Marijuana
Tilray (TLRY) has exported medical marijuana to the United States for a clinical study. The study will evaluate cannabis for relief of taxane-induced peripheral neuropathy caused by nerve damage resulting from chemotherapy in breast cancer patients. Tilray stock jumped over 10%.
This is not a big deal as similar studies are happening across the world.
An up move also occurred in CRON.
Investors ought to be aware of pump and dump schemes and hype.
The momo crowd is buying marijuana stocks. Smart money is inactive.
Technical Patterns
Gold miners are tracing a continuation wedge. This is bullish. ETF of interest is GDX.
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. This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.
Interest rates are ticking down and bonds are ticking up.
The dollar is slightly stronger.
Gold futures are at $1516, silver futures are at $18.31, and oil futures are $55.81.
S&P 500 resistance levels are 3020, 3050 and 3100; support levels are 2950, 2925 and 2918.
DJIA futures are down 46 points.
CHINA READY TO BUY $20 BILLION WORTH OF AG GOODS, MASSIVE SHORT SQUEEZE IN OIL
To gain an edge, this is what you need to know today.
China Shenanigans
When the market went up on Trump contention that China would buy $50 billion worth of agricultural goods from the United States, you may recall that The Arora Report was highly skeptical. Now that skepticism has been proven right. China is talking about now buying only $20 billion worth of agricultural goods from the United States in the first year. Without a trade deal and a trade war, China would have bought about $25 billion of agricultural goods from the United States.
Should the stock market give up the big gains it made on the report that now has proven to be false? The answer is ‘no.’ The reason is that the market is driven by the momo crowd and the momo crowd is not known for any deep analysis.
Durable Goods
Durable Goods Ex-transports came at -0.3% vs. -0.3% consensus.
Jobless Claims
Initial Jobless Claims came at 212K vs. 217K consensus.
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 momo crowd or smart money activity.
For longer term, please see gold and silver ratings.
Oil
Oil is undergoing a massive short squeeze. The momo crowd is aggressively buying oil. Smart money is lightly selling into the strength.
For longer term, please see oil ratings.
Marijuana
The momo crowd is buying marijuana stocks in the early trade. Smart money is inactive.
Technical Patterns
Gold is tracing a continuation diamond. This is bullish. The ETF of interest is GLD.
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 higher. This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.
Interest rates are ticking up and bonds are ticking down.
The dollar is weaker.
Gold futures are at $1495, silver futures are at $17.61, and oil futures are $56.27.
S&P 500 resistance levels are 3020, 3050 and 3100; support levels are 2950, 2925 and 2918.
DJIA futures are up 42 points.
BUYING ON BAD EARNINGS, TRUMP STATEMENT AHEAD ON RUSSIAN SUCCESS WITH TURKEY
To gain an edge, this is what you need to know today.
Buying On Bad Earnings
Until yesterday’s Morning Capsule, on the average earnings were better than expected. Since yesterday’s Morning Capsule, the trend has reversed.
It is important to observe what investors are doing and not what they are saying.
So far in the early trade, investors are buying the initial dips on bad earnings.
Two bad earnings of significant implications are semiconductor company TXN and construction equipment giant CAT. Buying on the initial dip has been especially strong on CAT and the stock has now turned positive.
Trump Statement Ahead
A Trump statement is ahead at 11:00 am ET. This may be a market moving event.
Russia has rapidly moved to strike an agreement with Turkey to jointly take control of northern Syria which was previously controlled by Americans with Kurd allies. Kurds will be moved out of the area.
It is not clear at this time what Trump is going to say.
Brexit
EU is likely to extend the deadline to January 31, 2020 to give Johnson more time to secure an approval from the Parliament.
Momo Crowd And Smart Money In Stocks
The momo crowd is buying stocks. Smart money is inactive.
Gold
The momo crowd is aggressively buying gold. Smart money is inactive.
Some of the buying in gold is due to developments in Turkey.
For longer term, please see gold and silver ratings.
Oil
API shows crude build of 4.45 million barrels vs. consensus of 2.23 million barrels. This data is bearish for oil. EIA data will be released at 10:30 am ET.
There is buying in oil on success of Russia with Turkey.
The momo crowd is buying oil. Smart money is inactive.
For longer term, please see oil ratings.
Marijuana
The momo crowd is aggressively 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 neutral. This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.
Interest rates are ticking down and bonds are ticking up.
The dollar is slightly stronger.
Gold futures are at $1493, silver futures are at $17.56, and oil futures are $53.90.
S&P 500 resistance levels are 3020, 3050 and 3100; support levels are 2950, 2925 and 2918.
DJIA futures are up 14 points.
IS A 20% DROP AHEAD IN THE STOCK MARKET LIKE LAST YEAR?
To gain an edge, this is what you need to know today.
Repeat Of Last Year
Last year, the stock market fell about 20% at the end of the year. Here is the question that investors are asking me now, “Will the stock market drop 20% again this year?” Let’s explore with the help of a chart.
The Chart
Please click here for an annotated chart of S&P 500 ETF (SPY). Many investors are asking about levels on Dow Jones Industrial Average (DJIA). However since very little money is tied to Dow Jones Industrial Average, investors should consider a chart of S&P 500. Those with portfolios heavy in technology stocks may want to consider a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows when the stock market fell about 20%.
- The chart shows the Arora buy signal given on Christmas Eve which has turned out to be the bottom.
- The chart shows that since the 20% drop in the stock market, the stock market has recovered all of the drop and more.
- The chart shows the breakout. This is a positive.
- The chart shows that the move after the breakout has been small. This is a negative.
- The chart shows that resistance is nearby.
- Historically the pattern the chart is tracing has a high probability of breaking out above the resistance level to the upside.
- The chart shows that RSI is overbought. This indicates that the market is vulnerable to the downside.
- The chart shows that the volume is typically higher on the down days. This is a negative.
- The first big difference between last year and now is the Fed policy. Last year the Fed was tightening. This year the Fed is easing. This is a positive.
- At The Arora Report, we monitor economic indicators from 23 countries. Our focus is on leading economic indicators. This year the leading economic indicators are weaker than the last year. This is a negative.
- Earnings are the single best determinate of the stock market in the long term. Earnings are slowing. Earnings season is in full swing. So far earnings are better than expected. This is a positive.
What Does It All Mean?
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.
The probability of a 20% drop in the near term is about 35%. Of course this probability will change based on the earnings and outcome of the phase one of trade war with China. The specific cash levels, hedge levels and positions to buy and hold are based on the probability given above.
Momo Crowd And Smart Money In Stocks
The momo crowd is buying in the early trade. Smart money is inactive.
Gold
The momo crowd is selling gold in the early trade. Smart money is inactive.
For longer term, please see gold and silver ratings.
Oil
The momo crowd is aggressively buying oil. Smart money is inactive.
There are concerns about increasing Russian influence in the Middle East.
For longer term, please see oil ratings.
Marijuana
The momo crowd is buying marijuana stocks in the early trade. 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 neutral. This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.
Interest rates are ticking down and bonds are ticking up.
The dollar is slightly stronger.
Gold futures are at $1489, silver futures are at $17.55, and oil futures are $54.07.
S&P 500 resistance levels are 3020, 3050 and 3100; support levels are 2950, 2925 and 2918.
DJIA futures are up 22 points.
RECESSION FEARS OF THE HERD ABATE
To gain an edge, this is what you need to know today.
Recession Fears Of The Herd Abate
Wall Street behaves like a herd. Now the herd is believing that a recession will not happen. In August, the herd was convinced that a recession was right ahead.
In August, the data did not justify the level of fear. Now the data does not justify the level of optimism.
In any case, The Arora Report subscribers got some good trades out of Wall Street’s herd mentality including nice trades on bond ETFs TBT and TLT.
Brexit
On Saturday, the first attempt to get Brexit through the British Parliament failed. Now the second attempt is ahead and the market is optimistic driving the pound up.
Momo Crowd And Smart Money In Stocks
The momo crowd is buying stocks in the early trade. Smart money is inactive.
Gold
There is no discernable momo crowd or smart money activity in the early trade.
For longer term, please see gold and silver ratings.
Oil
The momo crowd is buying oil. Smart money is inactive.
For longer term, please see oil ratings.
Marijuana
The momo crowd is buying marijuana stocks. Smart money is inactive.
Technical Patterns
German shares are tracing a hanging man. This is bearish. ETF of interest is EWG.
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 higher. This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.
Interest rates are ticking up and bonds are ticking down.
The dollar is slightly weaker.
Gold futures are at $1494, silver futures are at $17.78 and oil futures are $53.69.
S&P 500 resistance levels are 3020, 3050 and 3100; support levels are 2950, 2925 and 2918.
DJIA futures are up 46 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% – 32% and short to medium-term hedges of 5% – 15% and short term hedges of 5% – 15%.
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