WEEKLY MARKET DIGEST: GOOD EARNINGS, TRUMP THREAT SUPPORTS GOLD, WEAK ECONOMY BUT NO ONE CARES $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO

 WEEKLY MARKET DIGEST: GOOD EARNINGS, TRUMP THREAT SUPPORTS GOLD, WEAK ECONOMY BUT NO ONE CARES $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.

WEAK GDP BUT THE MOMENTUM DRIVEN MARKET DOES NOT CARE, GOLD SUPPORTED BY TRUMP COMMENT

This is what you need to know today.

Weak GDP

GDP is one of the most important economic indicators.  Q1 GDP-Advanced came at 0.7% vs. 1.1% consensus.

GDP is a lagging indicator and for this reason carries less weight in our timing models.  Our timing models give a heavier weight to leading indicators.

Reaction To GDP In Stocks, Gold And Bonds

Normally in reaction to such a weak GDP under these market conditions, stocks should have been crushed, gold should have been flying, bonds should have moved up strongly and dollar should have weakened.

As of this writing, the reality is quite different.  This momentum driven market does not seem to care.  We will be carefully watching to see if there is a delayed reaction.

Trump Comment Supports Gold

A comment from Trump that an attack on North Korea is possible over the next 100 days is supporting gold.

Oil

Oil is moving higher as the momo crowd is now done booking its losses and the selling pressure from the momo crowd has abated.

$2 Trillion Earnings Day

The critical $2 trillion earnings day is now behind us.  We will address the implications in a separate post in ZYX Buy.

Technical Patterns

Several coal stocks are showing a Bearish Flag.  ETF of interest is KOL.

Several financial stocks are showing a Bearish Engulfing Line.  ETF of interest is XLF.

This is powerful information and many investors use this to enter trades in addition to our official signals.  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 start out positive.

Interest rates, currencies and bonds are range bound.

Gold futures are at $1266, silver futures are at $17.29, and oil futures are $49.42.

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

DJIA futures are up 20 points.

 

TRUMP BACKS DOWN ON NAFTA, GOLD GYRATES ON TRUMP TAX PLAN

This is what you need to know today.

Stocks Resilient After Trump Tax Plan

There was a serious attempt to sell stocks down after Trump’s tax plan was announced.  Sellers found out the hard way that buyers were sitting right below the market.

Trump Backs Down On NAFTA

Yesterday rumors were rampant that Trump would pull out of NAFTA.  Late in the day, Trump did a big U-turn and is now going to stay in NAFTA.

Canada’s dollar and Mexico’s peso are jumping.

Central Banks

Bank of Japan lowered its inflation forecast and kept its stimulus policies.

Unexpectedly, Riksbank of Sweden decided to extend its bond buying program.  Swedish krona has weakened against the dollar.

ECB keeps policy unchanged.

Weak Durable Goods Orders

March Durable Goods Ex-Transports came at -0.2% vs. +0.4% consensus.

Weekly Jobless Claims

Initial Jobless Claims came at 257K vs. 242K consensus.  This is a leading indicator and carries a heavy weight in our timing models. We use a four-week moving average.

Gold

The momo crowd aggressively bought gold after Trump’s tax plan was announced.  The hope was that stocks would fall and money would rush into gold.  However, the ‘smart money’ was selling gold into the strength after gold crossed $1270.  Since then gold has pulled back.  A lot of selling has been coming from Europe.  It appears that Europeans think that after the first round of French elections, there is no need to hold that much gold.

Oil Breaks Support

Oil has broken support at $49.  The momo crowd first bought oil on the headline after EIA data was released .  The smart money sold into the strength after looking under the covers and realizing that gasoline inventories were higher than expected.  Oil prices are coming under further pressure on the news that two big oil fields in Libya have restarted pumping oil.

Technical Patterns

Many banks are tracing a Bullish Double Bottom Pattern.  ETFs of interest are KBE and KRE.

Many healthcare stocks are tracing a Bearish Shooting Star Pattern.  ETF of interest is XLV.

This is powerful information and many investors use this to enter trades in addition to our official signals.  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 a bigger than routine battle between bulls and bears today.

Interest rates and bonds are range bound.

Currencies are range bound.

Gold futures are at $1266, silver futures are at $17.43, and oil futures are $48.57.

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

DJIA futures are up 28  points.

THE TRUMP TAX PLAN, GOVERNMENT SHUTDOWN LIKELY AVERTED, SELL THE NEWS POSSIBLE REACTION, TAX PLAN NEGATIVE FOR GOLD

This is what you need to know today.

Trump Tax Plan

Later today, Trump will unveil an ambitious tax plan.

We will do a separate post; the Holy Grail section of this post will be different for each one of our services.

Government Shutdown Likely Averted

Trump appears to be giving up on immediate funding for the wall.  This concession from Trump is likely to avert a government shutdown.

Sell The News Reaction

Stock market often buys the rumor and sells the news.  Consider being alert to potential ‘sell the news’ reaction to Trump’s tax plan.

If the market dips, consider buying various securities as they come into buy zones and also taking profits on shorts.

Negative For Gold

Trump’s tax plan is negative for gold.  A big influential bank is out pounding the table that gold is about to fall to $1200.

Gold trading is listless. The ‘smart money’ as well as the momo crowd are  inactive.

API Oil Build

In a surprise, API data showed a build of 897K barrels vs. consensus of a draw of -1.6M barrels.  EIA data that is considered more authoritative will be released at 10:30 am ET.

Momo crowd is sitting on huge losses on oil and is an aggressive seller.

Technical Patterns

None of note.

This is powerful information and many investors use this to enter trades in addition to our official signals.  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, bonds and currencies are range bound.

Gold futures are at $1263, silver futures are at $17.54, and oil futures are $49.15.

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

DJIA futures are up 7  points.

 

BETTER THAN EXPECTED EARNINGS, TAX CUT, GOVERNMENT SHUTDOWN LOW PROBABILITY

This is what you need to know today.

Better Than Expected Earnings

Earnings are the single best determinate of long-term performance of stocks.

Earnings season is in full swing.  So far, over all  earnings are better than expected.  Earnings reported so far this morning are especially strong.

Tax Cut

Trump is signaling that his high priority is to bring the corporate tax rate down to 15%.  If he succeeds, this is very bullish for the market.

In our Dow Jones Industrial Average to 30,000 model, the assumption is a corporate tax rate of 20%. The model shows how DJIA can run to 30,000.

Government Shutdown

Due to the upcoming debt ceiling, there is a low probability of government shutdown.  In our analysis the probability is less than 10%.  If there is a shutdown and stocks fall, that will be a buying opportunity.

Gold

The ‘smart money’ continues to lightly sell gold.  The momo crowd continues to buy.  Gold continues under pressure as demand for safe haven assets dwindles.

Technical Patterns

Several junior gold miners are tracing a Bearish Descending Triangle.  ETF of interest is GDXJ.

South Korean stocks are showing Bearish Exhaustion.  ETF of interest is EWY.

This is powerful information and many investors use this to enter trades in addition to our official signals.  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.

Oil is testing support at $49.

Interest rates are ticking up and bonds are ticking down.

Euro is slightly stronger and yen is slightly weaker.

Gold futures are at $1268, silver futures are at $17.71, and oil futures are $49.07.

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

DJIA futures are up 154 points.

 

STOCKS RIPPING AND GOLD RIFFING ON FRENCH ELECTION

This is what you need to know today.

French Election

Going into the weekend, there were two nightmare scenarios.   The ultimate nightmare was the National Front’s Marine Le Pen winning and, eventually, pulling France out of the European Union (and, thus, the currency bloc). The immediate nightmare was a May 7 runoff between Le Pen and Jean-Luc Mélenchon of Unbowed France, or France Defiant. Le Pen is far-right, anti-immigrant and protectionist. Mélenchon is far-left, and wants fewer working hours and higher wages for the French.

Le Pen and Emmanuel Macron have won the first round and will face off on May 7 in the second round. Macron is a centrist and financial markets love him. According to preliminary results, Macron received 23.82% of the vote. Le Pen received 21.58% of the vote.

It is important to note what has come to be known affectionately as Arora’s Second Law of Investing, ‘Nobody knows with certainty what happens next.’ In my over 30 years in the markets, the only thing that works consistently is to think in terms of probabilities. Having said that, probability is now very high that Macron will be the next president of France. The reason is that in the first round, the vote was divided between a large number of candidates. The majority of the vote that went to the other candidates in the first round is likely to go to Macron in the second round.

Stocks

Stocks are ripping on French election.

Optimism over a new healthcare plan and tax reform is adding fuel to the fire.

Gold

The ‘smart money’ is selling gold.  As the need for safe haven has lessened, the momo crowd continues to buy gold.

Interestingly so far the momo crowd is not buying silver like it was buying silver last week.  The smart money was selling silver on Friday but is inactive this morning.

International Markets

Most international markets with the exception of China are higher. European markets are especially strong. Japan is also strong.  The Chinese market is going its own way and has fallen 1.4% on concerns that the government will attack leveraged trading.

Oil

There has been some buying on talk of OPEC wanting to prolong supply cuts.  However the buying is being met by selling by the momo crowd who are sitting on massive losses.

Technical Patterns

None of note.

This is powerful information and many investors use this to enter trades in addition to our official signals.  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.

Yen has fallen over 1%.

Euro has climbed over 1%.

Yields on French, Spanish, Portuguese, and Italian bonds are falling on French election.

Gold futures are at $1272, silver futures are at $17.77, and oil futures are $49.64.

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

DJIA futures are up 200  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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