WEEKLY MARKET DIGEST: FISCHER MAY MOVE THE MARKETS, CONTROL RISK OVER THE WEEKEND $GLD $SLV $USO $DIA $SPY $QQQ $TBF $TBT

 WEEKLY MARKET DIGEST:  FISCHER MAY MOVE THE MARKETS, CONTROL RISK OVER THE WEEKEND $GLD $SLV $USO $DIA $SPY $QQQ $TBF $TBT

(The Weekly Digest reproduces the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers. ) 

FISCHER MAY MOVE THE MARKETS, CONTROL RISK OVER THE WEEKEND

At Kansas Fed conference in Jackson Hole, Fed has often signaled a change in U. S. monetary policy.  Fed Vice-Chair, Stanley Fischer, will be speaking at Jackson Hole over the weekend.  There is potential of Fischer saying something that may move the markets world-wide on Monday.

Personal Income came at 0.4% vs. 0.4% consensus.  Personal Spending came at 0.3% vs. 0.4% consensus.

Bonds are moving higher with corresponding interest rates ticking lower on the weaker personal spending number.

Gold and silver are also trying to rally on the weaker number.

Oil is giving up some of yesterday’s gains that were mostly driven by short covering.

The probability is less than even that the 1000 point DJIA advance will be sustained.  There are many reasons for this.  Here are the two factors that have the most weight in our adaptive algorithms for this call.

  • Money flow is extremely positive.  Advances based on extreme positive money flow are usually not sustained.
  • About one-half of the 1000 point DJIA move is short covering and not actual buying.

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

What To Do Now?

In this environment, capital preservation should be a higher priority over return on capital.  Consider accessing your portfolio to make sure that your net exposure is in line with your risk tolerance.

Gold futures are at $1126, silver futures are at $14.47, and oil futures are $41.92.

S&P 500 resistance levels are 2000, 2017, and 2038; support levels are 1962, 1920, and 1860.

DJIA futures are down 116 points.

FIRST EPIC UP-MOVE IN U. S. STOCKS AND NOW BARN BURNER GDP

Yesterday DJIA moved up over 600 points.  However, the market is not out of the woods.  Over half of the up-move was short covering.

There are relief rallies in emerging markets.

Q2 GDP-Second Estimate came at 3.7% vs. 3.1% consensus.  This is a barn burner number and may again ignite again fears of a September rate increase by the Fed.

Oil is trying to rally over $40.00 because of the strong GDP number.

So far gold and silver have not reacted to the strong GDP number.

Dollar is getting stronger in response to the strong GDP number.

Interest rates have gotten somewhat divorced from the economic data as Chinese are selling U. S. Treasuries.

Our very, very short-term early stock market indicator is positive but is likely to reverse to a negative very quickly.

What To Do Now?

Consider not buying anything at these levels.  It is still too early to short sell.

If you did not follow our plan and have been overexposed with little cash, this rally is an opportunity to raise some cash.

Those investors who have followed our plan and are holding a fair amount of cash, may consider continuing to hold existing positions and add only on significant down days.

Gold futures are at $1121, silver futures are at $14.11, and oil futures are $39.95.

S&P 500 resistance levels are 2000, 2017, and 2038; support levels are 1920, 1860, and 1838.

DJIA futures are up 220 points.

A NEW STRONG U. S. ECONOMIC DATA POINT, GOLD AND TREASURIES FALL, CONFIDENCE RETURNS TO EMERGING MARKETS

In the U. S., Durable Goods Orders  came very strong indicating improving economy.  Orders ex-trans rose 2.2% vs. 0.3% consensus.

Gold, silver, and bonds are falling on the strong data.

Stocks and interest rates are rising.

European markets are off their lows.

Confidence seems to be returning to several emerging markets with the exception of China. Overnight stocks fell again in Shanghai.

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

What To Do Now?

Stay the course.  Consider taking advantage of the volatility by lightly scaling into long positions on dips and buying to cover short positions on the dips.  Be extra cautious before starting short positions at these levels.

Gold futures are at $1124, silver futures are at $14.15, and oil futures are $39.21.

S&P 500 resistance levels are 1920, 1962, and 2000; support levels are 1860, 1838, and 1800.

DJIA futures are up 339 points.

CHINA CUTS RESERVE RATIO AND STOCKS REBOUND ACROSS THE GLOBE

China cut reserve requirement ratio for its banks to be effective September 6th.  China also cut a bench mark interest rate.

Stocks across the globe have rebounded strongly after PBOC actions described above.  The big exception is Shanghai.  Stocks in Shanghai fell 7.6% as the government failed to intervene by buying blue chip Chinese stocks.

Most commodities, including oil, are rebounding; the only exceptions are gold and silver.  Overnight there was net selling by Chinese in gold.

Interest rates are rising as investors dump Treasury bonds they bought yesterday out of fear.

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

What To Do Now?

Consider staying the course and follow the directions set in yesterday morning’s post.

Gold futures are at $1150, silver futures are at $14.75, and oil futures are $39.58.

S&P 500 resistance levels are 1960, 2000, and 2028; support levels are 1920, 1860, and 1838.

DJIA futures are up 561 points.

FAILURE OF PBOC TO CUT RESERVE RATIO IS LEADING TO A BLOOD BATH, STOCKS VERY OVERSOLD PROVIDING AN OPPORTUNITY

It was widely anticipated that Peoples Bank of China would cut reserve ratio for Chinese banks over the weekend.  PBOC failed to act leading to a blood bath starting with over 8% decline in Shanghai, pushing commodities to 16 year lows, and crushing emerging currencies to record lows.  The contagion  has spread to Europe and the United States.

Stocks are very oversold.  Any positive announcement from the Fed or China may lead to a sharp reversal to the upside.

Chinese aggressively sold gold and silver.  North American momo crowd is now aggressively buying gold and silver.

Oil has broken the $40 major support.

What To Do Now?

  • Consider lightly scaling in new long positions or additions to existing positions.
  • Consider NOT buying aggressively.
  • Consider continuing to hold large amounts of cash.
  • Consider not selling existing good positions into this panic sell off.
  • Review hard stops as you do not want them to get hit in this sell off.  If you are going to sell something, make a conscious decision to sell.
  • Consider not short selling into these lows.
  • Consider not acting out of emotion.
  • Understand that 2013, 2014 and the first half of 2015 have been unusual in terms of low volatility.  The last few years are not the normal behavior of the markets.
  • Make volatility your friend.
  • If buying new positions, consider not being over confident.  No one, including you, knows with certainty what will happen next.

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

Gold futures are at $1159, silver futures are at $14.70, and oil futures are $38.95.

S&P 500 resistance levels are 1920, 1960, and 2000; support levels are 1860, 1838, and 1800.

DJIA futures are down 849 points.

 

 

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