WEEKLY MARKET DIGEST: IMPACT OF SYRIA AND CHINA ON STOCKS, GOLD, BONDS AND OIL; OPPORTUNITY IN RUSSIAN STOCKS $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO

 WEEKLY MARKET DIGEST: IMPACT OF SYRIA AND CHINA ON STOCKS, GOLD, BONDS AND OIL; OPPORTUNITY IN RUSSIAN STOCKS $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.

IMPACT OF SYRIA STRIKE ON STOCKS, GOLD, OIL AND BONDS, RUSSIAN STOCKS ANOMALY LOWER; JOBS REPORT

This is what you need to know today.

Impact Of Strikes On Syria

Last night the U. S. launched missile strikes on Syria in retaliation for chemical attacks on its citizens.

Here is the impact on various investments,

  • Stocks: none in the long-term. DJIA futures fell over 100 points on the news and then went on to gain all of it back.
  • Gold: very mild positive in the long-term.  Gold futures spiked over $1271, only to fall back to about $1264. Please also see ‘Technical Patterns’.
  • Oil: very mild positive in the long-term.  Oil futures spiked on the news but has given up most of its gains.
  • Bonds: none in the long-term.  Bonds spiked up on the news and are holding most of the gains.  Please also see ‘Technical Patterns’.
  • Yen: none in the long-term.  Yen spiked up on the news but has given up most of its gains.

Russia Stocks

Russian stocks have been crushed.  The reason is that Syria is a client of Russia.

For the time being the market is ignoring that Russia benefits from higher oil prices and oil prices are rising.

Jobs Report Anomaly

Non-farm Private Payrolls came at 89K vs. 175K consensus.  Gold is spiking on the report and so are volatility futures.  We were expecting a number like this because during the counting period severe weather likely affected the count.

In our analysis this number is an anomaly and investors should ignore the headline.

Technical Patterns

Gold crosses 200 Day Moving Average.  This is bullish.  ETF of interest is GLD.

Interest rates have Broken Support after tracing a Double Top.  This is bearish.  Bonds move inverse to interest rates.  ETFs of interest are TLT, TBF, TBT, TMF and TMV.

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 neutral.

Gold futures are at $1270, silver futures are at $18.41, and oil futures are $52.18.

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

DJIA futures are down 47  points.

FED THROWS COLD WATER ON RALLY, SMART MONEY SELLS GOLD, TRUMP XI SUMMIT, MOTHER OF ALL NUMBERS AHEAD, PAY ATTENTION TO ‘WHAT TO DO NOW’

This is what you need to know today.

Fed Throws Cold Water On Rally

In yesterday’s Morning Capsule we shared with you in advance,

Fed Minutes Ahead

Fed minutes of March 14-15 meeting will be released at 2:00 pm ET.

We will be carefully looking at how Fed plans to unwind its $4.5 trillion balance sheet.  This will have a long-term impact on our portfolios.

Well, Fed minutes came out and they said exactly what we had thought.  However it is now clear that Wall Street was way behind us and was not prepared for the statement on reducing the balance sheet.  DJIA fell from a gain of about 200 points to a loss of 50 points.

In theory, interest rates will go up, bonds will fall, gold will fall, high dividend paying stocks will fall and high beta stocks will fall.

Please note that markets are perverse.  In the short-term, a lot depends on Wall Street’s positioning; in simple English it means that if Wall Street heavily favors something, that side often loses money.

Now to the practical side of what investors can do about it.  Please carefully read ‘What To Do Now’ section in the Morning Capsule.  The guidance there is the sum total of practical advice based on everything that is happening in the world.  Please also pay careful attention to changes in the Model Portfolio.

Gold

Momo crowd bought gold and silver aggressively after Fed minutes came out.  This made no sense.  Perhaps this is why the ‘smart money’ sold gold when it crossed $1260.

We expect gold to be supported due to anxiety arising out of Trump Xi summit.

Trump Xi Summit

Please see the separate post.

Mother Of All Numbers Ahead

Tomorrow is the mother of all numbers — employment report for March.  This report gains extra importance in view of the Fed minutes.

Oil

EIA data was negative for oil.  Oil fell as it should have.  This morning momo crowd is back buying oil.  There is no buying by the smart money.

Technical Patterns

Nasdaq traces an Outside Day.  This is bearish.  ETFs of interest are QQQ and PSQ.  Please note that we acted on it yesterday in some of our services.

Several oil stocks showed an Engulfing Line.  This is bearish.  ETF of interest is XOP.

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 neutral.

Interest rates, bonds, and currencies are range bound but volatile.

Gold futures are at $1255, silver futures are at $18.23, and oil futures are $51.48.

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

DJIA futures are up 24 points.

STOCKS AND GOLD MOVE ON BLOWOUT ADP NUMBER, OIL RALLIES ON API, FED MINUTES AHEAD

This is what you need to know today.

ADP

ADP is the largest private payroll processor in the United States.  It uses its data to give investors an advanced look on the employment picture ahead of the official Department of Labor employment report that will be released on Friday.

ADP employment change came at 263K vs. 175K consensus.

Stocks

Stock futures immediately jumped after ADP report.  Stock market is looking for growth.  After several recent pieces of weak data, strong ADP data supports the growth thesis.

Gold

Gold immediately fell after the ADP report.  Those who were buying gold yesterday as a safe haven are selling gold today as ADP report negates their safe haven need.

Please also see ‘Technical Patterns.’

Oil

API oil inventories came at -1.8 million barrels vs. -200K consensus.  Oil is flying on the data.

Official EIA data will be released at 10:30 am today and has the potential to be a market mover.

Fed Minutes Ahead

Fed minutes of March 14-15 meeting will be released at 2:00 pm ET.

We will be carefully looking at how Fed plans to unwind its $4.5 trillion balance sheet.  This will have a long-term impact on our portfolios.

Technical Patterns

Gold failed at 200 Day Moving Average.   This is bearish. ETF of interest is GLD.

South Korean stocks traced an Island Top.  This is bearish.  ETF of interest is EWY.

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 positive.

Interest rates are ticking up and bonds are ticking down.

Currencies are range bound.

Gold futures are at $1248, silver futures are at $18.23, and oil futures are $51.73.

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

DJIA futures are up 77 points.

STOCKS WOBBLE AND GOLD GAINS ON AMERICANS BUYING LESS CARS, SOUTH AFRICA NOW JUNK

This is what you need to know today.

Americans Buying Less Cars

American economy is about 70% consumer.  For this reason it is absolutely important for investors to pay attention to the consumer behavior.  It was projected that March would be the month for auto sales rebound.  The reason is that manufacturers provided great discounts.

The reality turned out to be quite different.  Most manufacturers missed their estimates.

GM came at +1.6% vs. +7% consensus.

Ford came at -7.2% vs. -5.9% consensus.

Fiat Chrysler came at -4.6% vs. +0.4% consensus.

Toyota came at -2.1% vs. -1.2% consensus.

Stocks Wobble

Yesterday morning stocks were already under pressure because the buying pressure from quarter end window dressing had gone away.  Then came bad auto sales numbers.  DJIA dropped 145 points.

In yesterday’s Morning Capsule, we shared with you in advance,

At the beginning of a new quarter when the previous quarter was strong, significant new money tends to flow into the stock market in the first three days.  The new money is likely to counter any downward pressure in the market.

As new money entered the market, stocks rebounded.

This morning there is nervousness in the market due to poor car sales and ahead of Trump and Xi meeting. We shared with you in advance on  March 31st,

Trump Xi Summit Ahead

Most consequential event ahead for the markets is the summit between Trump and China’s President Xi.  Trump has been very anti China during his campaign.  Now Trump is saying that the summit will be difficult.

Our analysis is that Trump is likely to soften his stance on China.  If Trump fails to do so, expect a down draft in stocks and a move up in gold.

Safe Haven Buying In Gold

There is significant safe haven buying in gold on three events.

  • Poor auto sales
  • Trump Xi meeting
  • South Africa rating cut

Please also see the section ‘Technical Patterns.’

Safe Haven Buying In Yen

There is significant safe haven buying in Japanese currency yen.  This is putting pressure on many Asian markets.

South Africa Junked

We have been sharing with you the situation in South Africa.  Now S&P has lowered South Africa’s credit rating to junk.

Technical Patterns

Gold has peaked over 200 Day Moving Average.  This is bullish.  ETF of interest is GLD.

Small Cap Russell 2000 Index exhibited an Engulfing Line.  This is bearish.  ETF of interest is IWM.

Oil had an Inside Day.  This is bearish.  ETF of interest is USO.

Natural gas is showing a Continuation Wedge.  This is bearish.  ETF of interest is UNG.  Inverse ETF only for aggressive investors is DGAZ.

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 negative.

Interest rates have fallen and bonds have moved up.

Gold futures are at $1258, silver futures are at $18.30, and oil futures are $50.54.

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

DJIA futures are down 34  points.

NEW MONEY TO FLOW INTO THE MARKET, OPEC OPTIMISTIC ON OIL, GOLD SUPPORTED BY TRUMP, INDIA AT NEW HIGH

This is what you need to know today.

New Money

At the beginning of a new quarter when the previous quarter was strong, significant new money tends to flow into the stock market in the first three days.  The new money is likely to counter any downward pressure in the market.

OPEC Optimistic On Oil

OPEC is optimistic that oil inventories are likely to decrease.  This is supporting oil.  On the flip side, part of the run in oil was due to problems in Libya.  These problems are now easing but for the time being oil is oblivious to it.  If traders start paying attention to Libya, oil may come under pressure.

Gold Support By Trump

Ahead of the meeting with President Xi of China, Trump has stated that he is ready to tackle North Korea alone.  Traditional U. S. policy has been to put pressure on China to contain North Korea.  Trump statement is supporting gold.  Still there is no ‘smart money’ buying in gold or silver.

India At New High

Sensex, the main benchmark of Indian stocks closes at a new high on the first day of fiscal year 2018.  Sensex climbs about 300 points to a record 29,910.  The previous high was 29,681.

As a full disclosure, ZYX Allocation and ZYX Emerging have a position in India.

Technical Patterns

More oil stocks are showing a Double Bottom.  This is bullish.  ETF of interest is XOP.

Many financials that have been strong had an Inside Day.  This is bearish. ETF of interest is XLF.

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 neutral.

Euro is weaker.

Interest rates and bonds are range bound.

Gold futures are at $1249, silver futures are at $18.16, and oil futures are $50.73.

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

DJIA futures are up 14 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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