WEEKLY MARKET DIGEST: INFLATION BUILDING, FAILURE OF COMMODITY RALLY, SMART MONEY ACTIONS IN GOLD $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO

WEEKLY MARKET DIGEST: INFLATION BUILDING, FAILURE OF COMMODITY RALLY CONTRADICTS STOCKS, SMART MONEY ACTIONS IN GOLD $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.

A NEW WEAK SPOT IN ECONOMIC DATA, GOLD RUNS ON WEAKNESS

This is what you need to know today.

A New Weak Spot

There is a new weak spot in otherwise robust economic data.

April Retail Sales Ex-Auto came at 0.3% vs. 0.5% consensus.  Retail sales are extremely important because the U. S. economy is about 70% driven by consumers.

In our models we do not take into account autos because auto sales are very volatile. The noise they generate in algorithms makes forecasts inaccurate.  To see how we filter out noise, please click here.

Inflationary Pressures Not Yet Passed To Consumers

We have been telling you that inflationary pressures are building in the economy.  However, inflationary pressures are not yet being passed to consumers.

Core CPI came at 0.1% vs. 0.2% consensus.

Gold Runs On Weakness

Gold is running on weakness in economic data, please see SIGNAL QUALITATIVE: GOLD KEY SUPPORT RESISTANCE ZONES AND MONEY FLOWS.  This data is normally published in ZYX Buy and ZYX Short.

Technical Patterns

Natural gas is showing a Double Bottom.  This is bullish.  ETFs of interest are UNG and UGAZ.

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 there is a high probability of it turning negative.

Dollar is slightly weaker.

Bonds are ticking up and interest rates are ticking down.

Gold futures are at $1231, silver futures are at $16.44, and oil futures are $48.03.

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

DJIA futures are down 12  points.

INFLATION BUILDING, GOLD MOMO CROWD RESPONDS, TROUBLE IN CANADA

This is what you need to know today.

Inflation Building

Inflation pressures in the U. S. are building.

Core Producer Price Index (Core PPI) came at 0.4% vs. 0.2% consensus.  This is a leading indicator as price increases tend to show up at producer levels before they are passed on to consumers. Our market timing and allocation models heavily depend on leading indicators.  Please click here to see the inputs that go into our models.

Core PPI excludes food and energy.  The reason we exclude food and energy is because they are vey volatile.  The volatility creates lots of noise making it difficult to forecast. Please click here to see how we filter out the noise.

Jobless Claims

Initial Jobless Claims came at 236K vs. 242K.  This indicates that the employment picture in the U. S. is strong.  Strong employment is also contributing to forcing employers to raise wages.  This is also sowing seeds of  higher future inflation.

This is also a leading indicator and therefore carries heavy weight in our models.

Gold

Momo crowd was aggressively buying gold until the release of PPI and Initial Jobless Claims.  Momo crowd started selling gold after release of these numbers.

In the long-term, inflation is good for gold.  However, momo crowd has shown the consistent pattern to sell gold on higher inflation. Today is no different.

The reason is that the momo crowd has no interest in the long-term. They want to make a quick buck.  The ‘smart money’ is inactive.

Oil

Oil continues to run up after favorable inventory data released yesterday.  However there is a new fly in the ointment.  OPEC has increased its forecast of production by non-OPEC countries in the remainder of 2017.

A while ago, OPEC had predicted that production at non-OPEC countries would fall by 100,000 barrels per day.  The revised forecast is for an increase of 950,000 barrels per day.

Trouble In Canada

Moody’s has cut credit ratings of Canada’s six big banks.  The concern is that Canadians are over indebted and house prices are extraordinarily high.  This leaves banks vulnerable to large losses as consumers may not be able to pay back if house prices fall.

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 $1223, silver futures are at $16.26, and oil futures are $47.99.

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

DJIA futures are down 30  points.

NORTH KOREAN NUKES, CHINA PPI AND COMEY FIRING PUT PRESSURE ON STOCKS BUT HELP GOLD

This is what you need to know today.

North Korea Nukes

North Korea is going ahead with its nuclear program in spite of President Trump’s warnings to stop. Gold rocketed on the news.

China PPI

China Producer Price Index (PPI) decelerated to 6.4% vs. consensus of 6.7%. The prior month number was 7.6%. This is causing jitters all over the world including among the well informed about the U. S. stock market. Part of the reason for the stock market rally has been the global growth story which partially depends upon China.

Comey Firing

President Trump has fired FBI Director Comey. From an investment perspective this is causing a distraction in the way of healthcare and tax reform. Again among those well informed, this is causing concern about the U. S. stock market. However, since most investors are oblivious and buying on the momentum, it may not make a difference right away.

Korea Election

Moon Jae-in has been elected the new president of South Korea. He is less friendly toward the U. S. and advocates a softer stance towards North Korea.

Gold Saved By North Korea

Gold was way on its way to the support zone of $1200 when news on North Korean nukes hit.  Gold rocketed and is holding the gains.  Of note is that the gains are not as big as they should have been.

Oil

Traders have been buying oil on API reporting a decline of 5.8 M barrels in inventory vs. a decline of  1.8M barrels.  For the time being traders are ignoring a 3.2 million barrel rise in gasoline supplies.

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.

Currencies, interest rates and bonds are range bound.

Gold futures are at $1224ilver futures are at $16.27 oil futures are $46.55

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

DJIA futures are down  40 points.

FAILURE OF COMMODITY RALLY ATTEMPTS CONTRADICTS GLOBAL GROWTH STORY THAT IS POWERING STOCKS, SMART MONEY LIGHTLY SELLS GOLD

This is what you need to know today.

Commodity Rally Attempts

In recent days, every attempt to rally commodities ranging from oil to iron ore have failed.  A message from such failures is that perhaps global growth is slowing.

Reason Behind Stock Rally

After the Trump election, one of the reasons behind the stock rally has been projections that Trump policies will accelerate global growth.

Contradiction

Investors should pay attention to the contradiction here.  Stocks continue to power higher on the assumption that global growth will accelerate.  Rallies in commodities continue fail on the assumption that global growth will slow.

One of them is wrong.

There is too much noise in the data to reach a conclusion with a high level of confidence as to who is right at this time.

Gold

The ‘smart money’ is lightly selling gold.  This is highly unusual as the smart money typically sells the rallies and there is no rally here.

Technical Patterns

Natural gas is tracing a Symmetrical Continuation Triangle.  This is bearish.  ETFs of interest are UNG and DGAZ.

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 higher.

Dollar is stronger.

Interest rates are grinding up and bonds are grinding lower.

Gold futures are at $1220, silver futures are at $16.18, and oil futures are $46.27.

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

DJIA futures are up 38 points.

FRENCH ELECTION — BUY THE RUMOR SELL THE NEWS, OIL PACTS EXTENSION, MOMO BUYS GOLD

This is what you need to know today.

French Election

Macron won as expected.  Market is in the mode of, ‘Buy the rumor sell the news.’  Euro as well as European stocks are selling off.

Japanese Stocks Strong

Overnight Japanese stocks were strong, surging 2.3% on drop in yen.

Oil Pact

Russia and Saudi Arabia are signaling that they may extend production cuts into 2018.  Oil first rallied on the news.  For the time being the rallies are being sold by those who took large long oil positions around $53 and are still holding.  Oil is hovering near the major support level around $46.

Gold

The momo crowd is aggressively buying gold. Here are Nigam’s comments on Business Standard, India’s second largest financial publication.  India is one of the most important factors in gold prices.  Please note from the article heavy short positions are being built in India.  This may lead to a short squeeze and an unexpected move higher in gold.

Technical Patterns

Several large cap technology stocks are tracing a Hanging Man.  This is bearish.  ETF of interest is QQQ.

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.

Bonds and interest rates are range bound.

Gold futures are at $1230, silver futures are at $16.33, and oil futures are $45.90.

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

DJIA futures are down 31  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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