WEEKLY MARKET DIGEST: FATE OF STOCKS, GOLD AND BONDS; WINDOW DRESSING AHEAD, IRON ORE CRUSHED $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO

WEEKLY MARKET DIGEST: FATE OF STOCKS, GOLD AND BONDS; WINDOW DRESSING AHEAD, IRON ORE CRUSHED $DIA $GLD $QQQ $SLV $SPY $TBF $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.

FATE OF STOCKS AND GOLD IN THE HANDS OF HOUSE REPUBLICANS, STRONG EUROPEAN PMI, OIL HIGHER ON SAUDI CUT

This is what you need to know today.

(Unless you are super aggressive, please pay attention to ‘What To Do Now’ section by scrolling down, very short-term hedges have increased.)

Fate Of Stocks, Gold, and Bonds

The fate of stocks, gold and bonds is in the hands of House Republicans.  If the healthcare bill passes, stocks are likely to go up, gold and bonds are likely to go down.  If the healthcare bill does not pass, stocks are likely to go down, gold and bonds are likely to go up.

We also need to be aware of a small probability of a perverse market reaction on the news, opposite to what is stated above, if positioning of Wall Street changes between now and the time the vote result is announced.

European PMIs

Purchasing Managers Index for the euro area rose to 56.7 vs. 55.8 consensus.

Durable Goods

Durable Goods Ex-trans came at 0.4% vs. 0.7% consensus.  We are not too concerned about this weakness at this time.

Oil

Strong buying is being seen in oil on the news that Saudi exports to the United States  have fallen by about 300K barrels per day.

Technical Patterns

Several dividend paying stocks are showing inverted hammer.  This is a bullish pattern.  ETFs of interest are SDY and DIA.

Several gold related securities had an outside day.  This is a bearish pattern.  ETF of interest is GLD.

Please note that although traditional technical signals are very popular, they no longer work well.  They used to work much better in the 1980’s.  Now they are obsolete but it is worth paying attention to them because a large number of investors act on them.  If they are exclusively followed, you will lose money over a large number of trades over a long period of time. 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 suspended as the outcome for the stock market here is binary; market will go up if healthcare bill passes and vise versa.

Dollar is slightly stronger.

Gold futures are at $1245, silver futures are at $17.64, and oil futures are $47.96.

S&P 500 resistance levels are 2363, 2400 and 2450; support levels are 2334, 2300, and 2288.

DJIA futures are up 52 points.

THE D-DAY FOR STOCKS AND GOLD, MONEY FLOWING INTO RUSSIA

This is what you need to know today.

D-Day

Today is D-Day for stocks and gold.  The House is set to vote on the healthcare bill today.  If the bill passes, stocks are likely to go up and gold is likely to go down.  On the other hand if the bill fails, stocks are likely to go down and gold likely to go up.

Bonds, oil, and dollar are likely to behave similar to gold.

Initial Jobless Claims

Initial Jobless Claims are a leading indicator and have heavy weight in our models.  Initial Claims came at 258K vs. 239K consensus.  This is a volatile series, for this reason we look at a four week moving average.

Money Flowing Into Russia

Russian economy is very oil dependent.  Typically when oil falls, Russian stocks fall.

Based on all Russia related investigations in Washington, there would have been expectations of foreign funds pulling out of Russia.

What is happening is contrary to the typical historical pattern and expectations.  Funds are actually flowing into Russia and Russian stocks have held up remarkably well in the face of falling oil.

ZYX Emerging and ZYX Allocation have positions in Russia.

Technical Patterns

Several uranium related securities are tracing out a head and shoulders pattern.  This is a bearish pattern.  ZYX Short has positions in  URA and CCJ, profits have been taken on URRE.

Several housing related stocks are tracing out a hammer.  This is short-term bullish.  ZYX Buy has a position in KBH and ZYX Allocation has a position in XHB.

Please note that although traditional technical signals are very popular, they no longer work well.  They used to work much better in the 1980’s.  Now they are obsolete but it is worth paying attention to them because a large number of investors act on them.  If they are exclusively followed, you will lose money over a large number of trades over a long period of time. 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 suspended as the outcome for the stock market here is binary; market will go up if healthcare bill passes and vise versa.

Gold futures are at $1251, silver futures are at $17.65, and oil futures are $47.91.

S&P 500 resistance levels are 2400, 2450 and 2500; support levels are 2363, 2334, and 2300.

DJIA futures are down 23 points.

PART OF STOCK MARKET REVERSAL IS OPTION EXPIRATION, OMINOUS TECHNICAL PATTERNS, NO SMART MONEY BUYING IN GOLD, CHINA LIQUIDITY CRUNCH, IRON ORE SLAUGHTERED

This is what you need to know today.

Option Expiration Reversal

Yesterday S&P 500 tumbled the most since the election.  Those uninitiated in the ways of the market do not understand that about two-thirds of the fall yesterday was due to the reversal of prior gains from option expiration.

On Monday March 20th we stated:

We previously shared with you that part of last weeks up move in stocks was related to options expiration.  Such a move usually reverses in the following week.

On Friday March 17

Today is quadruple witching when index futures, index options, single stock options, and single stock futures expire.  This expiry has been exerting upward pressure on the stock market.

Often part of the gains from this week get reversed in the following week.

Healthcare Jitters

Late yesterday and this morning, gurus have caught on to the healthcare bill issue.  We told you that was causing a problem well before anybody else was talking about it.  In yesterday’s Morning Capsule we wrote,

 Conservative House Republicans are digging in to make changes to the health bill.  As these changes are made, passage in the Senate will become more difficult.

This needs careful watching because a big part of the stock rally not only in the U. S. but across the world depends on Trump actually accomplishing some of his agenda.

No Smart Money Buying In Gold

There is no buying by the ‘smart money’ in gold.  Please note that stops of shorts in gold are above $1250.  If gold moves higher, it can scream higher on short squeeze and hunting stops.

Iron Ore

Iron ore has been slaughtered falling about 4%.

As a full disclosure, we have taken advantage of the weakness to take profits on one-half of our iron ore short position  this morning.

Copper

Copper has fallen about 0.8%.  As a full disclosure, we are continuing to hold our short copper position.

China Liquidity Crunch

There is a massive liquidity crunch starting in China.  We will keep a close eye on it.

Ominous Technical Patterns

S&P 500 has traced out a double top.

Large banks have traced out a megaphone top.

Regional banks have traced out a megaphone top.

Good Technical Patterns

Several small gold and silver miner stocks are giving a triple moving average crossover buy signal.

Several utility stocks are giving moving average crossover signals.

Several healthcare stocks are tracing out a hammer pattern which is considered bullish.

Please note that although traditional technical signals are very popular, they no longer work well.  They used to work much better in the 1980’s.  Now they are obsolete but it is worth paying attention to them because a large number of investors act on them.  If they are exclusively followed, you will lose money over a large number of trades over a long period of time.  To learn more please click here.

Markets

Our very, very short-term early stock market indicator is neutral but expect the market to start out negative.

Dollar is weaker.

Interest rates are lower and bonds are higher.

Gold futures are at $1249, silver futures are at $17.56, and oil futures are $47.65.

S&P 500 resistance levels are 2400, 2450 and 2500; support levels are 2363, 2334, and 2300.

DJIA futures are down  42 points.

WINDOW DRESSING AHEAD, HEALTH BILL, EURO UP ON MACRON WIN, EMERGING MARKETS’ INTEREST RATES, GOLD JUMPS

This is what you need to know today.

Window Dressing

Window dressing is a technique used by many money managers to look better to their clients than they really are.  A typical money manager provides quarterly reports.  The quarter will end on March 31.  In window dressing, money managers buy stocks and ETFs that have done well during that quarter so that they can tell their clients that they are holding the best stocks and ETFs.  Also in a quarter when the market is up, they tend to buy broad stock market ETFs at the quarter end to show clients that they were mostly invested in the market.

In the long run, this makes no sense and hurts the clients.  However you need to be aware of what happens.

Expect window dressing upward pressure on stocks to counter at least some of the selling that may come from those who think this market hype is unsustainable.

Health Bill

Conservative House Republicans are digging in to make changes to the health bill.  As these changes are made, passage in the Senate will become more difficult.

This needs careful watching because a big part of the stock rally not only in the U. S. but across the world depends on Trump actually accomplishing some of his agenda.

Euro Up On Macron Win

In a French presidential election debate, Macron and Le Pen clash.  Surveys indicate that Macron solidified his base.  This is causing euro to scream higher.

Pound

The British pound has moved higher on economic data.

Emerging Markets’ Interest Rates

There are early indications that emerging markets’ interest rates are beginning  to creep up.  This has significant implications and is likely to provide significant opportunities in emerging markets. These opportunities will be discussed separately in ZYX Emerging Markets ETF Alert over the coming days.

Gold Jumps

Gold is jumping on weaker dollar.  Silver is especially strong.

Markets

Our very, very short-term early stock market indicator is neutral but expect the market to start higher.

Oil is seeing some buying due to weaker dollar.

Gold futures are at $1232, silver futures are at $17.44, and oil futures are $48.99.

S&P 500 resistance levels are 2400, 2450 and 2500; support levels are 2363, 2334, and 2300.

DJIA futures are up 25  points.

A WIN FOR U. S. AT G-20, OPTION REVERSAL IN STOCKS, SELLING IN OIL BUT BUYING IN GOLD

This is what you need to know today.

Win For U. S. At G-20

At G-20 the U. S. scored a victory as the final communique omitted a warning about protectionism.  Many G-20 members have been critical of Trump’s protectionist policies.

The insight here is that world leaders are not willing to cross Trump.  In the end this is good for U. S. stocks.

Options Reversal

We previously shared with you that part of last weeks up move in stocks was related to options expiration.  Such a move usually reverses in the following week.

Selling In Oil

Oil rigs operating in the U. S. have  reached a count of 631, the highest number since September 2015.

Further the data shows that speculators have been drastically cutting their bullish bets on oil.

There is strong selling  in oil on the foregoing two pieces of news.  There is no selling by the ‘smart money,’ perhaps it is a recognition by the smart money that when speculators sell aggressively, often a swing low is near.

Gold

There is healthy buying in gold in India and China.

Import by India are likely to exceed estimates.  Business Standard, India’s second largest financial publication says this morning,

 Nigam Arora, author of famous Arora report said, “Gold these days is more influenced by India and China.” This demand shows recovery.  On prices, Arora said, “The US Fed’s recent rate hike isn’t a one-off decision, but signals a series of rapid rate increases ahead. This was the first time since the financial crisis that the Fed was definitive about raising interest rates quickly.  Those who took positions for gold to go down can now get squeezed, and as a result of short covering, gold and silver have the potential to rise even higher. Aggressive traders may consider buying gold for short-term trade”

Markets

Our very, very short-term early stock market indicator is negative.

Dollar is weaker.

Bonds and interest rates are range bound.

Gold futures are at $1232, silver futures are at $17.43, and oil futures are $48.69.

S&P 500 resistance levels are 2400, 2450 and 2500; support levels are 2363, 2334, and 2300.

DJIA futures are down 4  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 27 – 38% of assets in cash or treasury bills, and short to medium-term hedges of  25% and very short term hedges of 5%.

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