WEEKLY MARKET DIGEST: INTEREST RATES JUMP HURTING STOCKS AND GOLD, OIL BULLISH $DIA $GLD $QQQ $SLV $SPY $TBT $USO

WEEKLY MARKET DIGEST: INTEREST RATES JUMP HURTING STOCKS AND GOLD, OIL BULLISH $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.

WHIPSAW ON CONFLICTING REPORTS ON CHINA $200 BILLION TRADE OFFER

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

Whipsaw On China $200 Billion Trade Offer

Earlier in the morning, stocks were being aggressively bought on a report that China was offering to cut  the trade deficit by $200 billion. Then new reports cast doubt on the China offer.  This has caused aggressive selling.

Momo Crowd And Smart Money

The momo crowd is getting whipsawed.  The smart money is inactive.

Gold

Trading in gold is listless as there are no triggers to move it one way or the other.

Oil

Oil continues to levitate on concerns about the Middle East.

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, the market can swing either way based on rumors.

Interest rates are ticking down and bonds are ticking up.

The dollar is ticking down.

Gold futures are at $1287, silver futures are at $16.40, and oil futures are $71.52.

S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.

DJIA futures are down 8 points.

THIS BREAKOUT SAYS THE BULL MARKET IS NOT ABOUT TO END, INTEREST RATES RISE CLOSE TO NEXT RESISTANCE

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

This Breakout Says The Bull Market Is Not About To End

This bull market is aging. How much more life is left in it? This is the key question. Here is an indicator with a good record to answer the question. Let’s explore with a chart.

Please click here for an annotated chart of small cap ETF (IWM). Similar conclusion can be drawn from a chart of Russell 2000 Index (RUT). Please note the following from the chart:

  • Small caps have broken out to a new all-time high.
  • Small cap stocks are breaking out to a new high at a time when major indices such as Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) are below their highs. Just pull up charts of S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ) and compare them with the Russell 2000 index.
  • Russell 2000 has made higher lows as shown on the chart. This is a positive.
  • The RSI pattern shown on the chart supports the breakout.
  • The breakout is on low volume. This is a negative.
  • A shallow pullback from here will not negate the positive implications of this breakout.

Near the end of the bull market, large cap stocks perform much better than the small cap stocks. The reason is rather simple. In a bear market large cap stocks lose less money than the small cap stocks. In a deep bear market, small cap stocks that are darlings of the bull market can be decimated. For this reason, the ‘smart money’ tends to pull money out of small caps when they see bull market potentially ending.

Right now the smart money is flowing into small cap stocks. The implication is that this bull market has further to go.

As an important caution, investors should not rely on any one indicator or any one form of analysis. Investors are well advised to rely on a sophisticated model that is comprehensive and has a proven track record over both bull and bear markets. At The Arora Report we use ZYX Global Multi Asset Allocation Model that has not only consistently beaten the market during the bull phase but also generated significant profits during the deep bear market of 2008 when most investors lost half of their money. One reason this model has worked so well is that it is adaptive, i.e., it changes itself with market conditions. Please click here to learn how the model automatically changes itself. Markets are dynamic and change rapidly. Models that are fixed may work under some market conditions and then stop working as conditions change. For this reason investors should focus on adaptive models.

Interest Rates Close To Next Resistance

Earlier today, the yield on 10-year Treasuries crossed 3.1%.  Not long ago we were talking about the 3% resistance level which is now the major support.  The next resistance level is 3.12%.

Momo Crowd And Smart Money

The momo crowd is getting whipsawed just like yesterday.  The smart money is inactive.

Gold

Stops have now been taken out on gold.  The move in gold from here will depend upon the direction of the dollar.  Since the dollar is stable, trading in gold is listless.

Oil

Brent oil hit $80 this morning.  Brent is the benchmark in Europe.  The benchmark in the U. S. is WTI.

In the U. S., WTI crude fell on release of inventory data yesterday.  The data was bearish.  After a shallow pullback, oil started rising again on Middle East concerns.

Technical Patterns

Small caps are breaking out.  This is bullish.  The ETF of interest is IWM.

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 can quickly turn in any direction.

Gold futures are at $1289, silver futures are at $16.47, and oil futures are $71.93.

S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.

DJIA futures are down 6  points.

MOMO GETTING WHIPSAWED AND WEAKER HOUSING STARTS

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

Housing Starts

Housing Starts came at 1287K vs. 1325K consensus.

Building Permits came at 1352K vs. 1350K consensus.

In our analysis, weaker housing starts are likely due to bad weather.

Industrial Production

Industrial Production came at 0.7% vs. 0.6% consensus.

Capacity Utilization came at 78% vs. 78.4% consensus.

Momo Crowd And Smart Money

The momo crowd is getting whipsawed this morning between aggressive buying and aggressive selling.

The smart money is inactive.

Gold

Gold is showing weakness as most stops are taken out.

Oil

IEA  cuts global oil demand growth from 1.5 million barrels per day to 1.4 million barrels per day in 2018.  There is light selling in oil on this report.

API data shows 4.9 million barrel build in inventory vs. consensus of 2 million barrels build.

EIA data will be released at 10:30 am and may be a market mover.

Italy

Populist parties in Italy want the next government to seek $296 billion debt write-off from the European Central Bank (ECB).  Italian bonds are falling.

In our analysis this is of concern.  In general, we do not want to see governments of prosperous countries wanting debt write-offs.

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.

Interest rates, bonds and currencies are range bound.

Gold futures are at $1287, silver futures are at $16.21, and oil futures are $70.94.

S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.

DJIA futures are  down 15  points.

INTEREST RATES AND DOLLAR JUMP HURTING STOCKS AND GOLD

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

Interest Rates And Dollar

Interest rates and the dollar are jumping hurting stocks and gold.

Relieving The Overbought Condition

Stocks are overbought in the very, very short-term.  Yesterday we wrote,

 the market is very overbought and vulnerable.

Whenever stocks become overbought, some selling develops that ultimately relieves the overbought condition.  It is a part of the natural process.

Momo Crowd And Smart Money

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

Gold Breaks Support

Gold has broken the support at $1300 as the dollar rises.  The momo crowd is aggressively selling.  The smart money is inactive.

Oil

Oil is rising on Middle East tensions.

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.

Gold futures are at $1297, silver futures are at $16.27, and oil futures are $71.75.

S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.

DJIA futures are down 147  points.

TRUMP ZTE TWEET AND CHINA’S RESPONSE ON QCOM BOOSTING THE SENTIMENT

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

A Departure From The Routine

The purpose of the Morning Capsule is to provide the big picture.  For the sake of clarity and brevity, we minimize discussion of individual companies and ETFs.  This Morning Capsule is a departure from the routine because the company specific news has a monumental global  impact on the U. S. stock market and emerging stock markets in Asia more than any economic indicator.  The news is a precursor to China and the U. S. resolving their trade differences.  It is important for investors to be at least somewhat familiar with the details described below.

Trump ZTE Tweet

Trump tweeted to help ZTE (ZTCOY) concerned that too many jobs are being lost at ZTE.  Of note is that ZTE is not an American company and jobs are not being lost in America.

ZTE is a Chinese giant of telecommunication equipment. It relies heavily on parts from U. S. companies, specifically semiconductors and optoelectronics.

ZTE previously pleaded guilty to selling U. S. technology to Iran.  This was in violation of U. S. sanctions against Iran.

Last month Trump banned U. S. companies from selling to ZTE.  Due to high dependence on U. S. companies,  last week ZTE came to a collapse.  Now Trump has thrown a lifeline to ZTE.

China’s Response To Trump Throwing The Lifeline

China is responding to Trump throwing a lifeline to ZTE by restarting review of NXPI buyout by QCOM.  QCOM  is a U. S.  company and its technology is in almost every smart phone.  NXPI is a Dutch semiconductor company with products in promising areas such as autonomous driving.

Previously the deal appeared to be dead because of lack of Chinese approval.  Now there is a good possibility of the deal going through.

Individual Posts

The analysis given above will drive several individual posts on our various Real Time Feeds over the coming weeks for actionable items.

Momo Crowd And Smart Money

The news is creating strong positive sentiment.  The momo crowd is buying aggressively.  The smart money is buying selectively.

Gold And Oil

Trading in gold and oil is listless in the absence of any major catalysts.

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 positive but the market is very overbought and vulnerable.

The dollar is ticking lower.

Interest rates are ticking higher and bonds are ticking lower

Gold futures are at $1319, silver futures are at $16.66, and oil futures are $70.87.

S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.

DJIA futures are up 55 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 20% – 35% and short to medium-term hedges of  15% – 25% and very short term hedges of 10%.

 

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.

Please click here to take advantage of a FREE  30 day trial.

Check out our enviable performance in both bull and bear markets.

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