WEEKLY MARKET DIGEST: JAPAN STUNS WITH NEGATIVE INTEREST RATES, RUSSIA CLARIFIES ON OIL, FED REFUSES TO COW TAIL $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO

WEEKLY MARKET DIGEST: JAPAN STUNS WITH NEGATIVE INTEREST RATES, RUSSIA CLARIFIES ON OIL, FED REFUSES TO COW TAIL $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO

(The Weekly Digest reproduces the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers. ) 

JAPAN STUNS WITH NEGATIVE INTEREST RATES, RUSSIA CLARIFIES ON OIL, AND GDP RELEASE

This is what you need to know today.

Japan Stuns

Overnight Japan stunned the world by introducing negative interest rates.  Japan matters because it is still the third largest economy in the world.

Negative interest rates in this case will require banks to pay interest on deposits to BOJ on funds they hold beyond a certain threshold level.

The purpose of negative interest rates is three fold.

  • Incentivize banks to lend to avoid paying interest on excess funds they hold.
  • To lower its currency, yen, to boost exports.
  • To stop foreign funds from flowing into yen.  Yen is considered a safe haven.  During the present market volatility, foreign funds have been flowing into yen and thus strengthening the yen. The corner stone of Abenomics, the economic plan introduced by Japan’s Prime Minister Abe, is lower yen.

Sweden and Denmark have previously instituted negative interest rates.  For U. S. dollar based investors, the move does not mean a whole lot other than for holders of gold.

Russia Clarifies On Oil

Russian energy minister has clarified yesterday’s statement attributed to him in the media, please see the post on oil from yesterday.  He is saying that no meeting has been scheduled and no arrangements have been worked out to cut oil production.

GDP

This morning GDP growth came at 0.7% vs. 08% consensus.  GDP is an extremely important economic number.  If the number would have come much above or much below consensus, it would have provided clarity for the stock market.

Since the number came roughly in line with consensus, there is still no clarity about the stock market in the economic data.

Markets

Smart Money is selling gold and silver on the Japanese move.

Oil ran up on comments by the Russian energy minister.  Oil would have been running down on clarification by the Russian energy minister if it was not Friday.  In this environment, oil finds support on Friday’s because shorts do not want to carry large positions over the weekend.

Yen is falling and dollar is rising.

Interest rates are range bound.

Our very, very short-term early stock market indicator is positive.

What To Do Now?

It is important for investors to look ahead and not in the rear view mirror.

Consider only adding new positions per new posts since October 1st.

Consider continuing to hold existing positions.  Based on individual risk preference, continue to hold 25-42% cash or hedges.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.

Gold futures are at $1113, silver futures are at $14.18, and oil futures are $33.79.

S&P 500 resistance levels are 1900, 1909, and 1920; support levels are 1860, 1838, and 1800.

DJIA futures are up 131 points.

A Reminder

As our long time subscribers know well, that during the 2008 and early 2009 market crash, when stock market lost about 50%, subscribers to The Arora Report made money by the boat load.  For long only investors, this remarkable performance was achieved by using inverse ETFs.

Our models do not expect a repeat of 2008.  In the most likely worst case, there may be a garden variety bear market that typically occurred every 18 to 24 months prior to the recent six-year market run.

Individual Trades

Please click on Home on the left side of the Menu.  Scroll down on the Home Page for individual trades.

Click on the Search by Symbol/Tag on the right hand side and click on the symbols of interest.

FED REFUSES TO COW TAIL, STOCKS-OIL CORRELATION BREAKS DOWN

This is what you need to know today.

As is often the case, the Fed did not cow tail and the stock market threw a fit.  Please see the post from yesterday afternoon on the FOMC statement.

Lately there has been about 95% correlation between stocks and oil.  Yesterday that correlation broke down.  In simpler words,  oil and stocks were trading together, yesterday they stopped trading together.

Almost always, when an important correlation breaks down, it means a big move.  In this case, it presages a move in oil to the upside, gold and silver to the downside, bonds to the downside, and stocks to the upside.

Smart Money is aggressively selling gold and silver, and buying oil.

Our very, very short-term early stock market indicator is positive.

What To Do Now?

It is important for investors to look ahead and not in the rear view mirror.

Consider only adding new positions per new posts since October 1st.

Consider continuing to hold existing positions.  Based on individual risk preference, continue to hold 25-42% cash or hedges.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.

Gold futures are at $1121, silver futures are at $14.38, and oil futures are $32.78.

S&P 500 resistance levels are 1900, 1909, and 1920; support levels are 1860, 1838, and 1800.

DJIA futures are down 2 points.

A Reminder

As our long time subscribers know well, that during the 2008 and early 2009 market crash, when stock market lost about 50%, subscribers to The Arora Report made money by the boat load.  For long only investors, this remarkable performance was achieved by using inverse ETFs.

Our models do not expect a repeat of 2008.  In the most likely worst case, there may be a garden variety bear market that typically occurred every 18 to 24 months prior to the recent six-year market run.

Individual Trades

Please click on Home on the left side of the Menu.  Scroll down on the Home Page for individual trades.

Click on the Search by Symbol/Tag on the right hand side and click on the symbols of interest.

THREE MAKE OR BREAKS; FED STATEMENT, OIL INVENTORIES, AND EARNINGS

This is what you need to know today.

There are three make or break events ahead.

The Fed

FOMC has been meeting since yesterday.  It will announce its policy decision at 2:00 pm ET.  There is no press conference this time.

Previously Fed indicated that it may raise interest rates four times in 2016.

Market consensus is that the Fed will raise rates only twice in 2016 due to weakness in oil and China.

Here are three potential scenarios this afternoon.

  • Near Consensus
    The Fed may come close to market consensus.
    Such a scenario will be slightly positive for the market.
  • Dovish
    The Fed may be more dovish than the market with emphasis on language such as “extended pause.”
    This scenario will be positive for the market.
  • Hawkish
    The Fed sticks with its prior indication of four interest rate raises and emphasizes strong employment picture in the United States, creeping inflation, oil weakness is transient, or China does not have much impact on the U. S.
    This scenario will be temporarily negative for the market.

Oil

API inventory build came above 11 million barrels vs. consensus of 1.64 million barrels.  Oil fell on the news.  At 10:30 am ET, DOE will provide inventory data.  DOE data is considered more authoritative than API data.

The market will compare DOE data not with the consensus but to the API data.  Even if DOE data comes slightly above the consensus, oil will  rally instead of falling as might normally be the case.

Earnings

Among major companies, there have been excellent earnings from MMM, PG, and JNJ.

There are exceptionally weak earnings from AAPL.  Earnings from BA and UTX are also weak.

There are many important earnings still ahead including FB after the close.

Most Notable

Emerging markets may take off like a rocket if the Fed is dovish.

Markets

Gold and silver are being bought in anticipation of a dovish statement from the Fed.

Bonds are being sold in anticipation of a hawkish statement from the Fed.

Clearing gold and bonds are on different wave lengths.  Typically gold and bonds do not share common large investors.

Oil is range bound awaiting  inventories.

Our very, very short-term early stock market indicator is neutral but the markets are likely to state out negative because of heavy weight of AAPL in some of the indices.

What To Do Now?

It is important for investors to look ahead and not in the rear view mirror.

Consider only adding new positions per new posts since October 1st.

Consider continuing to hold existing positions.  Based on individual risk preference, continue to hold 25-42% cash or hedges.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.

Gold futures are at $1119, silver futures are at $14.48, and oil futures are $30.65.

S&P 500 resistance levels are 1900, 1909, and 1920; support levels are 1860, 1838, and 1800.

DJIA futures are down 98 points.

A Reminder

As our long time subscribers know well, that during the 2008 and early 2009 market crash, when stock market lost about 50%, subscribers to The Arora Report made money by the boat load.  For long only investors, this remarkable performance was achieved by using inverse ETFs.

Our models do not expect a repeat of 2008.  In the most likely worst case, there may be a garden variety bear market that typically occurred every 18 to 24 months prior to the recent six-year market run.

Individual Trades

Please click on Home on the left side of the Menu.  Scroll down on the Home Page for individual trades.

Click on the Search by Symbol/Tag on the right hand side and click on the symbols of interest.

AL-FUZAIA MOVES OIL, OVERHEAD SUPPLY STILL NOT EXHAUSTED, TIME TO WATCH EARNINGS

This is what you need to know today.

Nawal is the governor of Kuwait’s OPEC.  She has expressed her personal opinion, not the official opinion of Kuwait, OPEC members are willing to cooperate to cut oil production.  She also predicts oil in the range of $40 to $60 per barrel.

Her remarks turned around oil and stock futures.

gold and silver had seen heavy buying.  As news of Al-Fuzaia’s remark spreads, gold is pulling back after trading as high as $1115.

Overnight when Chinese government did not step in to buy stocks, Shanghai started plummeting and carried most of the Asian markets down with it.  The bright spot was India which gained 0.2%.  Shanghai ended down 6.4%.

In U. S. stocks and oil, the overhead supply is still not exhausted.

Dollar is strengthening and bonds are falling.

Our very, very short-term early stock market indicator is neutral.

What To Do Now?

It is important for investors to look ahead and not in the rear view mirror.

Consider only adding new positions per new posts since October 1st.

Consider continuing to hold existing positions.  Based on individual risk preference, continue to hold 25-42% cash or hedges.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.

Gold futures are at $1112, silver futures are at $14.39, and oil futures are $30.80.

S&P 500 resistance levels are 1900, 1909, and 1920; support levels are 1860, 1838, and 1800.

DJIA futures are up 62 points.

A Reminder

As our long time subscribers know well, that during the 2008 and early 2009 market crash, when stock market lost about 50%, subscribers to The Arora Report made money by the boat load.  For long only investors, this remarkable performance was achieved by using inverse ETFs.

Our models do not expect a repeat of 2008.  In the most likely worst case, there may be a garden variety bear market that typically occurred every 18 to 24 months prior to the recent six-year market run.

Individual Trades

Please click on Home on the left side of the Menu.  Scroll down on the Home Page for individual trades.

Click on the Search by Symbol/Tag on the right hand side and click on the symbols of interest.

OVERHEAD SUPPLY HITS STOCKS AND OIL, HEAVY DOSE OF EARNINGS AHEAD

This is what you need to know today.

Last week we shared with you that there was overhead supply in stocks and oil.  That call has proven spot on.  The supply is now coming into play and hitting stocks and oil hard.  The key question is, “Where is the underneath demand?”  Unfortunately there is simply not enough input data available for our algorithms to produce a conclusion with a reasonable confidence level.

As overhead supply hits stocks and oil, money is moving  back into safe haven assets like bonds and gold.

Currencies are range bound.

This week is heavy in earning, these earnings will determine the near future course of stocks.

Our very, very short-term early stock market indicator is negative.

What To Do Now?

It is important for investors to look ahead and not in the rear view mirror.

Consider only adding new positions per new posts since October 1st.

Consider continuing to hold existing positions.  Based on individual risk preference, continue to hold 25-42% cash or hedges.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.

Gold futures are at $1106, silver futures are at $14.25, and oil futures are $31.06.

S&P 500 resistance levels are 1900, 1909, and 1920; support levels are 1860, 1838, and 1800.

DJIA futures are down 77 points.

A Reminder

As our long time subscribers know well, that during the 2008 and early 2009 market crash, when stock market lost about 50%, subscribers to The Arora Report made money by the boat load.  For long only investors, this remarkable performance was achieved by using inverse ETFs.

Our models do not expect a repeat of 2008.  In the most likely worst case, there may be a garden variety bear market that typically occurred every 18 to 24 months prior to the recent six-year market run.

Individual Trades

Please click on Home on the left side of the Menu.  Scroll down on the Home Page for individual trades.

Click on the Search by Symbol/Tag on the right hand side and click on the symbols of interest.

 

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