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.
JUNE SHOCKER!
This is what you need to know today.
Unexpected June Shocker
Non-Farm Private Payrolls came at 25K vs. 160K consensus. To make matters worse, April numbers are significantly revised downwards.
Digging below the surface, there are major divergences from ADP numbers. There appears to be major new weakness across the board. Normally when the headline number is so far off the consensus, under the surface there are anomalies. The report was released at 8:30 am ET, we will be digging deeper to make sense of it.
Markets
The immediate reaction to the report is as one would expect.
Gold and silver are spiking up. Our ratings on gold and silver are likely to change.
Interest rates are falling and bonds are rising
Dollar is falling.
Oil has two opposing forces. On one hand the falling dollar means that oil should go higher. On the other hand, weak employment means lower demand.
Our very, very short-term early stock market indicator is negative.
Gold futures are at $1234, silver futures are at $16.37, and oil futures are $48.84.
S&P 500 resistance levels are 2100, 2111 and 2132; support levels are 2063, 2038, and 2017.
DJIA futures are down 62 points.
RUMORS ON OIL, HIGHER GROWTH IN EUROPE AND ADP IN LINE
This is what you need to know today.
Oil
OPEC meeting is underway. In yesterday’s Morning Capsule, we shared with you;
Saudi is floating the idea of production ceiling. OPEC appears to have given up on the idea of production freeze.
About two hours later, the foregoing appeared on Wall Street Journal site. We have been sharing with you that the momo crowd is responsible for the latest rally in oil. Momo crowd is not known for deep study or a network of deep sources. Momo crowd aggressively bought oil, running it up, when the oil ceiling rumor appeared in Wall Street Journal. As of this writing, according to our sources, Iran is resisting Saudi attempts to push through a production ceiling.
Wall Street is positioned for no OPEC agreement. For this reason, if there is an agreement, the reaction will be disproportional to the upside.
API Inventory Data was worse than the consensus. EIA Inventory Data will be released at 11:00 am ET. Oil initially dipped on API data, but the dip was bought by the momo crowd.
Europe
European Central Bank (ECB) has raised 2016 growth forecast to 1.6% vs. 1.4%. ECB will start buying corporate bonds beginning June 8th. It is worth a reminder that ECB will be buying corporate bonds because it has run out of sovereign bonds to buy. In the process, ECB is going much farther than the Fed ever did.
ECB left its benchmark interest rate unchanged.
Employment
ADP Employment Change came at 173K vs. 170K consensus. ADP is the largest private payroll processor in the United States. It uses this data to compile the Employment Change Report ahead of the market moving Employment Report that will be released by the Department of Labor tomorrow at 8:30 am ET.
Weekly Initial Unemployment Claims came at 267K vs. 268K consensus. This data has a heavy weight in our models because this is a leading indicator.
Markets
Yen is becoming stronger against the dollar in the aftermath of postponement of sales tax implementation in Japan.
Other major currencies are range bound.
Interest rates and bonds are range bound.
Momo crowd continues to buy gold proclaiming that a double bottom at $1201 markets the end of the correction. Smart Money is inactive in gold.
Our very, very short-term early stock market indicator is negative.
Gold futures are at $1216, silver futures are at $16.01, and oil futures are $48.34.
S&P 500 resistance levels are 2100, 2111 and 2132; support levels are 2063, 2038, and 2017.
DJIA futures are down 49 points.
THREE MAJOR EVENTS AHEAD, PMI DAY
This is what you need to know today.
Employment Report
The Department of Labor will release May Employment Report on Friday at 8:30 am ET. This is likely to be a market moving report. This report will also in large part determine if the Fed raises interest rates in June or July.
OPEC Meeting
OPEC will meet tomorrow. Saudi is floating the idea of production ceiling. OPEC appears to have given up on the idea of production freeze.
ECB
ECB will meet tomorrow. No policy change is expected. However nuances may be market moving.
PMI Day
Eurozone Manufacturing PMI came at 51.5 vs. 51.5 consensus.
China Manufacturing PMI came at 50.1 vs. 50.0 consensus.
Japan PMI came at 47.7 vs. 47.6 consensus.
In the U. S., the ISM data will be released at 10:00 am ET. The data may be market moving if it is not near the consensus.
India
The Indian economy grew by 7.9% vs. 7.5% consensus. India is now the fastest growing large economy in the world.
Markets
Yen is strong on Japan postponing sales tax plan implementation.
Gold ran up to $1222 before meeting resistance and is now pulling back.
Oil continues to pull back but is likely to be volatile based on rumors from OPEC.
Interest rates and bonds are range bound.
Our very, very short-term early stock market indicator is negative.
Gold futures are at $1217, silver futures are at $16.00, and oil futures are $48.03.
S&P 500 resistance levels are 2100, 2111 and 2132; support levels are 2063, 2038, and 2017.
DJIA futures are down 83 points.
YELLEN TURNS HAWKISH BUT MARKETS TEMPORARILY DO NOT CARE
This is what you need to know today.
Hawkish Yellen
For the first time in a long time, Yellen has turned hawkish. She has joined other FOMC members saying that rate hike is coming.
Stocks, gold, and bonds dipped for a few minutes after the news but then marched higher against the conventional wisdom.
This illustrates the power of market positioning. When Yellen news came, markets were in the throw of a short squeeze. The short squeeze has been so powerful that it continued in spite of the news.
Today will be a tell if the short squeeze ends and markets pull back.
Gold
Over the long weekend, gold formed a very, very short-term double bottom at $1201 followed by aggressive buying by both the momo crowd and the technical crowd. Smart Money is inactive.
China
China stock market experienced a flash crash but rapidly recovered for a gain of 3.3%. Going into this session, shorts have been at a very high level and a big part of this gain appears to be short squeeze. In any case, this gain is lending support to the U. S. stock market.
Economic Data
March Case Shiller Housing Index rose 5.4% vs. 5.1% consensus.
Personal Spending rose 1.0% vs. 0.7% consensus.
Personal Income rose 0.4% vs. 0.4% consensus.
Core PCE prices rose 0.2% vs. 0.2% consensus. This indicator has a heavy weight in our models and the Fed closely watches this.
Markets
Gold and oil keep on running on momo and technical buying.
Interest rates, bonds and currencies are range bound.
Our very, very short-term early stock market indicator is negative.
Gold futures are at $1213, silver futures are at $16.04, and oil futures are $49.56.
S&P 500 resistance levels are 2111, 2132, and 2132; support levels are 2063, 2038, and 2017.
DJIA futures are up 34 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 30 – 42% of assets in cash or treasury bills, and short to medium-term hedges of 30% of non-cash positions.
