WEEKLY MARKET DIGEST: FED INJECTS FUNDS FOR THE FIRST TIME IN A DECADE AND GLOBAL GROWTH FORECAST CUT TO THE SLOWEST IN A DECADE $SPY $GLD $QQQ $SLV

WEEKLY MARKET DIGEST: FED INJECTS FUNDS FOR THE FIRST TIME IN A DECADE AND GLOBAL GROWTH FORECAST CUT TO THE SLOWEST IN A DECADE $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.

QUADRUPLE WITCHING, MOMO BUYS STOCKS BUT SMART MONEY INACTIVE

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

Quadruple Witching

Today is quadruple witching.  In quadruple witching, stock index futures, stock index options, stock options and single stock futures expire. This may lead to unusual volatility.

Repo Issues

We have previously written about the Fed having to inject liquidity. Repo issues continue. As we have previously stated, irrespective of scary headlines, these issues are technical in nature and should not have any negative effect on investors in the short term.

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 gold.

Oil

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

Marijuana

There is no discernable momo crowd or smart money 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 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 are ticking up and bonds are ticking down.

The dollar is slightly stronger.

Gold futures are at $1508, silver futures are at $17.88, and oil futures are $59.03.

S&P 500 resistance levels are  3020, 3050 and 3100; support levels are 2950, 2925 and 2918.

DJIA futures are up 55 points.

GLOBAL GROWTH FORECAST CUT TO THE SLOWEST IN A DECADE — OPPORTUNITIES AHEAD

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

Slower Growth

Organization for Economic Cooperation and Development (OECD) cuts its global growth projection to 2.9% this year.  Only four months ago, OECD was projecting 3.2% growth.  The new projection is the lowest in a decade.

This business cycle has been unusually long.  Slower growth is to be expected.  Investors who get ahead of the curve and understand that the growth will be slower will have numerous money making opportunities from their investments.

Jobless Claims

Initial Jobless Claims came at 208K vs. 213K consensus.  This is a leading indicator and shows that overall the economy in the United States remains strong.

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 gold.

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

Solar stocks are tracing a hanging man. This is bearish.  ETF of interest is TAN.

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 weaker.

Gold futures are at $1518, silver futures are at $18.06, and oil futures are $58.40.

S&P 500 resistance levels are  3020, 3050 and 3100; support levels are 2950, 2925 and 2918.

DJIA futures are down 84 points.

FED INJECTS FUNDS FOR THE FIRST TIME IN A DECADE — LOSING CONTROL, SAUDI OIL, MARIJUANA LICENSE

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

Fed Injects Funds

For the first time in a decade, the Fed injected funds into the U. S. financial system.

Repo rates surged as high as 10%,  more than 400% rise from Monday.  Repo rates are the cost of borrowing cash overnight via repurchase agreements. The Fed had no choice but to intervene.

The Fed is injecting another $75 billion this morning.

The situation is due to technical factors and are not of a concern to investors in the short term. However, in our analysis at The Arora Report, this is the first indication that the Fed may be beginning to lose control over short term rates.  Controlling short term rates is the most important tool the Fed has.  This is one of the many reasons that investors ought to be watchful and defensively optimistic from a long term point of view.

The Fed Day

The Fed will announce its policy decision at 2:00 pm ET.  We have been covering this in the prior Morning Capsules.  There is nothing new to add.

Momo Crowd And Smart Money In Stocks

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

Gold

There is no discernable momo crowd or smart money activity in gold as traders await the Fed decision.

Oil

Saudi keeps oil flowing and meeting all of its short term commitments.  The production is coming back faster than many analysts expected.  Due to the reversal in oil prices, the momo crowd is sitting on big losses.  You may recall that at the peak in oil price the momo crowd was buying and smart money was selling. Smart money has proven spot on.  The Arora Report call is also proven spot on.

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

Marijuana

The Canadian government has suspended the license of CTST, two months after it had become known that CTST grew marijuana in unlicensed rooms.

The situation is company specific but it is causing negativity in the entire marijuana space.

The momo crowd is selling 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 undeterminable because of the Fed meeting.  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 stronger.

Gold futures are at $1509, silver futures are at $17.92, and oil futures are $58.86

S&P 500 resistance levels are  3020, 3050 and 3100; support levels are 2950, 2925 and 2918.

DJIA futures are down 40 points.

FED STATEMENT, CHINA TALKS AND RESPONSE TO SAUDI ATTACK AHEAD

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

Fed Statement

The Fed will announce its decision tomorrow at 2:00 pm ET.  The consensus is for a 25 basis points interest rate cut.  The most critical will be the policy statement.  There is no consensus about the policy statement.  For this reason, markets can potentially have violent moves based on the policy statement.

If the policy statement is very dovish, especially announcing a series of rate cuts and other easing measures, expect stocks to rocket to new highs and gold to stage a strong rally.

If the policy statement is very hawkish, expect 5 – 7% drop in stocks in the near term; expect gold to drop $150 – $200.

In our analysis, the highest probability is for the Fed to take a neutral stance.  The reason is that the Fed recognizes that it does not control trade talks and geopolitics.  The only prudent choice for the Fed is to be neither dovish nor hawkish.

China Talks

Lower level talks with China will take place on Thursday.  Expect Trump administration to issue statements bullish for the stock market.  Such bullish statements may provide rocket fuel to the stock market especially if the Fed is dovish.

Response To Saudi Strike

There are a lot of divergent views.  So far, the most important observation that we have is that there is no political support among both Democrats and Republicans for the U. S. to directly strike Iran.  Of course it will be Trump’s decision.  The most important observation so far in this regard is that Trump seems to be deferring to the Saudi royal family.  This landscape is bullish for stocks and bearish for oil.  However keep in mind Arora’s Second Law of Investing and Trading.

Momo Crowd And Smart Money In Stocks

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

Gold

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

Investors ought to make a note that gold not running up on Saudi attack is an extremely negative development. In the past, gold would have run up more than $100 on such an attack.

Oil

The momo crowd is aggressively buying oil.  Smart money is selling into the strength.

Marijuana

There is a serious concern that the proposed bans on flavored e-cigarettes will spill into marijuana vaping. Such a spill over may reduce demand.  In any case these developments are bearish for marijuana.

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

Technical Patterns

Large-cap oil stocks are setting up a head and shoulders bottom pattern.  This is bullish.  ETF of interest is XLE. However, a more comprehensive analysis, not just technicals, shows that this pattern has a high probability to fail in oil stocks at this time. Please see yesterday’s Morning Capsule.

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. Expect the market to open lower unless there is news. Also keep in mind that historically the stock market tends to run up on the day before the Fed announcement.  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 in anticipation of Fed rate cut.

Currencies are range bound.

Gold futures are at $1506, silver futures are at $17.90, and oil futures are $61.77.

S&P 500 resistance levels are  3020, 3050 and 3100; support levels are 2950, 2925 and 2918.

DJIA futures are down 64 points.

ALL INVESTORS OUGHT TO PAY ATTENTION TO THIS CHART AFTER SAUDI ATTACK

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

Saudi Attack

Big Saudi Arabia oil fields are heavily protected with American weapons. Yemen’s Houthi rebels seem to have defeated multi-billion dollar defenses with 10 drowns and succeeded in causing major damage. The attack has removed about 5% of global oil supplies. Oil jumped the most on record after the attack.

It sounds scary for oil and stocks, but for the time being, the chart tells a different story. All investors, not just oil investors ought to pay attention to this chart.

The chart

Please click here for an annotated chart of oil futures (CLV19).

Note the following:

  • From the chart, note the down slopping trendline.
  • Oil gapped open.
  • Oil has as of this writing broken above the trendline.
  • Note from the chart that oil has not touched the resistance level.
  • Even before the attack on Saudi oil fields, oil was tracing higher lows as shown on the chart.

What does it all mean?

The fact that oil did not break above the resistance shown on the chart indicates the following;

  • President Trump is cushioning the oil price rise by releasing oil from the Strategic Petroleum Reserve, if needed.
  • Other countries also have oil reserves that may be used to cushion a price rise.
  • Saudi Arabia has a substantial stockpile of oil that it can use to keep the market supplied with oil.
  • Other OPEC countries and Russia can pump more oil.
  • It is relatively easy to increase production of oil in the United States.
  • In spite of sanctions against Iranian oil, Asian countries may end up buying more Iranian oil.
  • The world economy is slowing. The latest data from China shows that industrial production is at its lowest point in 17 years. Industrial production came at 4.4% in August compared to the same period a year earlier vs. consensus of 5.2%.
  • Slowing world economy uses less oil.
  • Since the U. S. is self-sufficient in energy, there should not be much impact on the U. S. economy.
  • Saudi Arabia is claiming that it will bring back about one-third of the production rather quickly.

Concerns

The situation should calm down without much of an impact on investors unless scenarios similar to the following occur.

  • Similar attacks on oil production not only in Saudi Arabia but elsewhere in the Middle East happen again and again.
  • The U. S. along with its allies attacks Iranian oil fields and installations.
  • Iran attempts and succeeds in closing the Strait of Hormuz. The Strait of Hormuz is a choke point in oil shipments.

Investing and trading

The following are of interest to investors and traders:

  • Oil ETFs exhibit tracking errors. Having said that, ETF (USO) is of significant interest. For very short term trades leveraged ETFs such as (UWT), (DWT), (OILU) and (OILD) are of interest.
  • Regarding oil equities, ETFs (XLE), (XOP) and (OIH) are of interest.
  • Among large-cap oil stocks Exxon (XOM), Chevron (CHX) and Royal Dutch Shell (RDS.B) are of interest.
  • Traders looking for larger movements may look at (CRK), (DNR) and (WLL).
  • Of significant interest are oil service stocks such as (HAL) and (SLB).
  • Cruise lines such as (CCL) and (RCL) may be negatively affected.
  • Airlines such as (UAL), (DAL) and (AAL) may also suffer in the short term.
  • Refiners such as (VLO) may benefit.
  • India and China may be adversely affected because they are crude importers. Indian ETFs of interest are (EPI) and (INDA). Chinese ETFs of interest are (ASHR) and (FXI).
  • Russian ETF (RSX) may benefit.

Oil Positions

We will do specific posts.

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 only lightly buying gold and silver. Smart money is inactive.

Oil

The momo crowd is aggressively buying oil.  Smart money is lightly selling into the strength.

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 negative but can swing either way on news. Also the stock market can move up on short covering if the big dip does not materialize.  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.

Currencies are range bound.

Gold futures are at $1509, silver futures are at $17.90, and oil futures are $60.32.

S&P 500 resistance levels are  3020, 3050 and 3100; support levels are 2950, 2925 and 2918.

DJIA futures are down 108 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%.

 

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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