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.
STRONG JOBS REPORT, SILVER BREAKS SUPPORT AT $20
This is what you need to know today.
Jobs Report
Jobs report was strong as we expected. Private Non-farm Payrolls came at 217K vs. 171K consensus. Total Non-farm Payrolls came at 255K vs. 185K consensus.
Average Hourly Earnings rose 0.3% vs. 0.2%. This report shows that the U. S. economy is doing well.
Silver And Gold
Silver has broken support at $20.
Gold is still levitating above support at $1350 because of aggressive buying by the momo crowd.
The economic data is very negative for gold and silver.
Oil
Oil was showing signs of the rally petering out until strong jobs report was released. The jobs report is giving oil a second wind.
Markets
Our very, very short-term early stock market indicator is positive.
Interest rates are rising and bonds are falling.
Dollar is getting stronger against euro and yen.
Gold futures are at $1351, silver futures are at $19.95, and oil futures are $41.81.
S&P 500 resistance levels are 2200, 2222, and 2250; support levels are 2150, 2132, and 2120.
DJIA futures are up 110 points.
U. K. CUTS INTEREST RATES FOR THE FIRST TIME SINCE 2009, LONGEST STRETCH OF IMPROVING EMPLOYMENT SINCE 1973
This is what you need to know today.
U. K.
U. K. cut interest rates by 0.25%. Bank of England will also buy 60 billion pounds of government bonds over the next six months and 10 billion pounds of corporate bonds in the next 18 months. There is also a program to provide 100 billion pounds of loans to banks.
This is a response to the Brexit vote.
The British pound is falling. As a full disclosure, ZYX Short has a short position in British pound.
Longest Stretch Since 1973
The employment picture in the U. S. has improved for the longest stretch since 1973. This observation is based on a moving average of new jobless claims staying below 300,000 for 74 weeks in a row.
Jobless Claims came at 269,000 vs. 265,000 consensus.
As our long time readers know, jobless claims have a heavy weight in our models as this is a leading indicator.
Oil
When oil fell below $40 stops were taken out. When weak API data came, weak hands were taken out. The set up was perfect for a short squeeze when EIA data came. EIA data was much worse than the consensus. Oil first fell and then squeezed higher as shorts bought to book profits.
Gurus and journalists who are not successful at trading often spend their time looking for reasons after the fact. Once a particular theory starts generating page views, other journalists follow with their version of the same theory. The theory yesterday was that gasoline demand was better than expected. However the data does not support it.
Markets
Our very, very short-term early stock market indicator is neutral.
Gold is trying to rally on stimulus from the Bank of England but silver is seeing selling.
Interest rates, bonds, and currencies are range bound.
Gold futures are at $1368, silver futures are at $20.41, and oil futures are $40.81.
S&P 500 resistance levels are 2165, 2200 and 2222; support levels are 2150, 2132, and 2120.
DJIA futures are up 29 points.
TRUMP PROPOSES BORROWING HALF A TRILLION DOLLARS FOR A NEW GOVERNMENT PROGRAM, POSITIVE EMPLOYMENT DATA
This is what you need to know today.
Trump And Clinton
Will the media is focused on all the noise related to elections, the big news for investors is that Trump has just proposed borrowing half a trillion dollars for a new government infrastructure program. This is twice the amount that Clinton had previously proposed.
The insight for investors is that it appears both candidates are making promises to borrow more and spend more. On the positive side, Trump favors Fed stopping its policy of keeping interest rates artificially low. Over the next six weeks, it will be important for investors to start positioning for the out come of the U. S. election.
Employment
ADP Employment Change came at 179K vs. 165K consensus.
Oil
API Oil Inventories dropped by 1.34 million barrels vs. a fall of 2 million barrels consensus.
EIA will report data at 10:30 am ET.
Several attempts to rally oil overnight and early morning have failed.
Markets
Our very, very short-term early stock market indicator is neutral.
Gold, silver, currencies, base metals, interest rates and bonds are range bound.
Gold futures are at $1367, silver futures are at $20.55, and oil futures are $39.62.
S&P 500 resistance levels are 2165, 2200 and 2222; support levels are 2132, 2120, and 2100.
DJIA futures are down 29 points.
DISAPPOINTMENT AND ABE REFUSES TO BOW TO THE MARKETS
This is what you need to know today.
Japan
Japan announced 4.6 trillion yen in additional spending as part of the 28 trillion yen package Shinzo Abe indicated last week. Markets were expecting much bigger stimulus and are disappointed. Yen and gold go higher, stocks go lower.
In our analysis, the stimulus is well designed and perhaps in the long term is better for Japan. Our markets are addicted to stimulus and when they do not get what they expect, they do not behave any different than an addict.
Australia
Reserve Bank of Australia cut its benchmark rate by 0.25% to 1.5%, this is a record low. The main observation here is that yield premium of Australian bonds over U. S. Treasuries declined to the lowest level in 15 years.
Economic Data
Core PCE Prices came at 0.1% vs. 0.2% consensus. Personal Income came at 0.2% vs. 0.3% consensus. Personal Spending came at 0.4% vs. 0.3% consensus.
Markets
Our very, very short-term early stock market indicator is neutral.
Oil is trying to rally from the $40 level.
Dollar is weak.
Precious metals are going higher on weaker dollar.
Interest rates and bonds are range bound.
Gold futures are at $1370, silver futures are at $20.80, and oil futures are $40.41.
S&P 500 resistance levels are 2165, 2200 and 2222; support levels are 2150, 2132, and 2120.
DJIA futures are down 22 points.
MARKET COMPLACENT BUT AUGUST – SEPTEMBER PERIOD MAY BE GOOD FOR BEARS
This is what you need to know today.
Complacency
Stock market is complacent. Based on historical patterns, after the kind of year we have had so far, there is a high probability of a dip in August and September.
Negative sentiment that has been fueling the market is now exhausted as sentiment has turned bullish.
The plan is to use a dip to buy or buy-to-cover unless something fundamentally changes.
Fed
William Dudley, president of Federal Reserve Bank of New York, is stating that investors are underestimating how many times Fed can raise interest rates.
China
China’s official manufacturing Purchasing Managers Index fell to 49.9 vs. 50.6 consensus. A number below 50 indicates economic contraction. However a private index measuring the same thing came at 50.6.
Japan
Tomorrow Prime Minister Shinzo Abe will announce details of fiscal stimulus. This is likely to be a market moving event.
Markets
Our very, very short-term early stock market indicator is neutral.
Silver is seeing aggressive buying.
Trading in gold is quiet.
Momo crowd attempted to rally oil but the rally has failed.
Interest rates are ticking up and bonds are ticking down.
Dollar is ticking up slightly compared to other major currencies.
Gold futures are at $1354, silver futures are at $20.51, and oil futures are $41.00.
S&P 500 resistance levels are 2200, 2222, and 2250; support levels are 2132, 2120, and 2100.
DJIA futures are up 16 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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