WEEKLY MARKET DIGEST: INVESTORS BUY BANKS AS CENTRAL BANKERS HAWKISH, GOLD PREMIUMS JUMP IN INDIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO

WEEKLY MARKET DIGEST: INVESTORS SCRAMBLE TO BUY BANKS AS CENTRAL BANKERS TURN HAWKISH, GOLD PREMIUMS JUMP IN INDIA BUT EUROPEANS SELL $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.

INVESTORS SCRAMBLE TO BUY BANKS AS CENTRAL BANKERS TURN HAWKISH, GOLD PREMIUMS JUMP IN INDIA BUT EUROPEANS SELL, INDEPENDENCE DAY

This is what you need to know today.

Central Banks Turn Hawkish

In the wake of several communications from major central bankers from across the globe this week, at least temporarily, markets are waking up to the fact that central banks have turned hawkish.  We have been sharing this very important development with you for a while well in advance.

Scramble To Buy Banks

Investors are responding to their new found but belated information about hawkishness of central banks to buy banks.

When interest rates rise, banks tend to benefit. Typically banks pass on rising interest rates in full to the borrows but give only partial benefit to depositors.  This increases profit margins of the banks.

As a full disclosure, there is a heavy weighting towards in both ZYX Buy and ZYX Global Allocation.

Gold Premiums Jump In India

Gold premiums are jumping in India. Gold is being sold in India up to $10 an ounce over the official domestic price and the NYMEX benchmark.

The reason is that goods and services tax (GST) on gold will go up to 3% on July 1st.  Currently the tax is 1.2%.

Indians are crowding jewelry shops to beat the tax deadline.

In anticipation of the demand, India has been importing gold heavily.  In May, gold imports rose four fold year over year to 103 tons.

Our insight here is that this is a negative development for gold.  The reason is that the demand in May and June is borrowing from the demand in July and August.   The Arora Report expects demand for gold in India to fall off the cliff as the month turns. 

Europeans Sell Gold

While Indians are aggressively buying gold, this morning Europeans are aggressively selling gold.  The reason is that euro is getting stronger.  Please also see the section on bond yields.

Bond Yields Rise

In response to hawkishness of central bankers, bond yields are rising both in the U. S. and in Europe.  Bond prices move inverse to bond yields.  As bond yields rise, bond prices are taking a hit.

Short Squeeze In Oil

A short squeeze is occurring in oil causing oil to move up.  Such a short squeeze is common before the Independence Day holiday.  Typically it reverses after July 4th.

Tech Stocks

So far the ‘smart money’ is not buying the dip in tech stocks.

Independence Day Holiday

As you know our team works hard.  To allow our team members to spend more time with their families, our offices will be closed tomorrow and Monday for the Independence Day holiday. The stock market will be open Monday for half-day.

We will still continue to track our positions and will do a post if immediate action is required.

Technical Patterns

Silver traced a Hanging Man.  This is bearish. ETF of interest is .

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 $1240, silver futures are at $16.57, and oil futures are $45.25.

S&P 500 resistance levels are 2450 and 2500; support levels are 2425, 2400, and 2363.

DJIA futures are up 9 points.

STOCK BULLS’ NEW STRATEGY IS HOPE; ECB PANICS AND MOVES GOLD, EURO, STOCKS AND BONDS

This is what you need to know today.

The Hope Strategy

One of Arora’s laws is, ‘Hope alone is never a good strategy.’

The fate of the U. S. stock market largely depends on Trump agenda.  If the Trump agenda moves forward, stocks have the potential to melt up.  If the Trump agenda stalls, stocks can easily see a deep correction.

GOP was committed to passing the healthcare bill in the Senate before July 4th recess.  Yesterday the GOP did an about face and delayed a vote on the healthcare bill until after the recess.  Initially the stock market started falling on the news but then the momo crowd started aggressively buying.

Clearly the Trump agenda is stalling but the bulls’ strategy is ‘hope.’

Prudent investors ought to pay special attention to the ‘What To Do Now’ section of the Morning Capsule under these conditions.

ECB Panics

Previously we shared with you Draghi’s statement about ending QE in Europe.  The statement lead to strengthening euro, weakness in stocks and bonds, and strength in gold. This is not what ECB wanted.  Just now ECB did an about face and stated that Draghi’s comments were misunderstood.

This about face is causing euro and gold to move down, and stocks as well as bonds to move up.

Gold

Trading in gold is quiet.  Gold is simply following the moves in euro.

Oil

Oil prices slid when API reported a build of 851K barrels vs. consensus of 2.3M barrel draw.

Oil market is anxiously waiting EIA data that will be released at 10:30 am ET.

Technical Patterns

Several technology stocks are tracing a Flag pattern. This is bearish.  ETFs of interest are and .

Several semiconductor stocks are tracing a Flag pattern.  This is bearish.  ETF of interest is .

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 expect the market to start out positive.

Gold futures are at $1252, silver futures are at $16.83, and oil futures are $44.12.

S&P 500 resistance levels are 2450 and 2500; support levels are 2425, 2400, and 2363.

DJIA futures are up 42 points.

DRAGHI HINTS QE MAY END SENDING EURO AND GOLD HIGHER, TRUMP AND MODI, BRAZIL’S PRESIDENT CHARGED

This is what you need to know today.

Draghi Hints

European  Central Bank’s President Mario Draghi hints that QE may be ending.  This has implications in that more money may flow into Europe.  Considering that the U. S. stock market is very overbought and is relatively overvalued, we will keep a close eye on money flows.  If money starts flowing out of the U. S. stock market and into the European market, it will make sense to own more European stocks and less U. S. stocks.

Yellen

Yellen speech is ahead.  Her speech has the potential to be a market moving event.

Euro And Gold

Euro is moving up strongly on Draghi’s comments.

Euro is a big part of the dollar index.  As a result the dollar is moving lower.  Gold is priced in dollars. When dollar moves lower, gold moves up.  This is exactly what is happening today.

Trump And Modi

India’s Prime Minister Modi and Trump had a nice visit yesterday.  Indian stock market is expensive but offers one of the best opportunities in the world for long-term investors who buy on pullbacks.

As a full disclosure ZYX Global and ZYX Emerging have positions in India.  TTM, an Indian auto manufacturer, is in ZYX Buy.  Most investors should focus on an Indian ETF used by ZYX Global and ZYX Emerging.

Brazil’s President Charged

In a stunning move Brazil’s president has been charged with corruption.  If Brazilian stocks fall significantly from here it will be a strong buying opportunity.

Brazil is covered in ZYX Emerging.

Oil

There is fairly aggressive buying in oil ahead of API data.

Technical Patterns

Several semiconductor stocks are tracing an Engulfing Line.  This is bearish.  ETF of interest is .

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.

Interest rates are falling and bonds are rising.

Gold futures are at $1250, silver futures are at $16.62, and oil futures are $43.87.

S&P 500 resistance levels are 2450 and 2500; support levels are 2425, 2400, and 2363.

DJIA futures are down 15  points.

GOLD SOLD IN A DOWN SWEEP BUT STOCKS RISE AS GERMAN CONFIDENCE HITS HIGH

This is what you need to know today.

German Confidence

Based on a survey from Munich based Ifo, German confidence hit the highest levels since 1991.  The consensus was for the index to fall 114.4 from prior reading of 114.6.  The index came at 115.1.  The higher the number, the higher the business confidence.

Gold And Silver Swept Down

Gold and silver were aggressively swept down on  German business confidence.

In a down sweep, an aggressive seller puts in an order to take out all resting buy orders way below the market.  In the case of gold, the seller swept all the way down to about $1236 starting from about $1256.

18,500 gold contracts were swept down on CME.  CME is the primary exchange where gold futures are traded in the United States.

Silver Not Spared

Silver was not spared. 5,500 silver contracts were also swept down.

Stocks Rise

Stocks started running ahead of the release of German business confidence index and have continued to maintain the gains throughout the morning.

Durable Goods

Durable Goods are throwing cold water on jubilation of stock bulls.  Durable Goods Ex-transport came at 0.1% vs. 0.3% consensus.  The reason we focus on the number by taking transports out is because transports are very noisy and cause problems with making projections.

In plain English, goods that last several years were sold less than anticipated.

Technical Patterns

Several biotech and healthcare stocks are tracing a Hanging Man.  This is a bearish pattern.  ETFs of interest are , , , and .  It is of interest that this pattern is coming after a technical breakout to the upside.

Several industrial stocks are tracing an Outside Bar.  This is a bullish pattern.  ETF of interest is .

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 expect the market to start with a gap up.

Currencies, interest rates and bonds are range bound.

Gold futures are at $1243, silver futures are at $16.56, and oil futures are $43.30.

S&P 500 resistance levels are 2450 and 2500; support levels are 2425, 2400, and 2363.

DJIA futures are up 66 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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