WEEKLY MARKET DIGEST: NO IMMEDIATE DANGER FROM FED UNWINDING, PROBLEMS IN 2019, PLAN TO MAKE MONEY FROM UNWINDING $DIA $GLD $QQQ $SLV $SPY $USO

WEEKLY MARKET DIGEST: NO IMMEDIATE DANGER FROM FED UNWINDING, PROBLEMS IN 2019, PLAN TO MAKE MONEY FROM UNWINDING $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.

GOLD AND BONDS ROAR AS DOLLAR SLUMPS ON WEAK INFLATION AND RETAIL SALES DATA; OIL RALLIES ON NIGERIA

This is what you need to know today.

Inflation Data

Core CPI came at 0.1% vs. 0.2% consensus.  In our models, we do not use headline CPI and exclude food and energy because they are very volatile and the volatility makes accurate analysis very difficult.  To see how we filter out the noise, please click here.

Retail Sales

Retail Sales ex-auto came at -0.2% vs. +0.2% consensus.  We exclude auto from our models because auto sales are very volatile and create noise that clouds the analysis.

Bonds And Gold Roar But Dollar Weakens

After dovish Yellen testimony, weak economic data released today makes it less likely that interest rates will rise soon.

Any currency that pays a lower interest rate gets weaker.  Dollar fell on the news.

Gold is priced in dollars.  As dollar fell, gold roared.

Interest rates fell.  Bonds go up when interest rates fall.

Momo Controlled Stocks Don’t Care

So far in 2017, stocks have been under  significant control of the momo crowd.  The momo crowd does not care about the economy or fundamentals.  Momo simply buys because the price is going up.

This morning is no different.  Momo is totally oblivious to the weak economic data.  In contrast the ‘smart money’ cares about the economic data.

The momo crowd continues to buy stocks aggressively in the pre-market.  We will have to see if the smart money steps in to sell.  So far, the smart money is inactive.

Oil

We have been sharing with you that a big reason behind the pressure on oil prices has been that production in Nigeria and Libya has been rising.  Both countries have been exempt from OPEC production limits.  The news today is that Nigeria is agreeing to a cap of 1.8 million barrels per day.  Nigeria is producing 1.733 million barrels per day at this time.

This is a positive development for oil.  Oil is rallying on the news.

Technical Patterns

Many small cap stocks are tracing 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 neutral.

Gold futures are at $1229, silver futures are at $16.02, and oil futures are $46.11.

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

DJIA futures are up 14 points.

NO IMMEDIATE DANGER FROM FED UNWINDING, PROBLEMS LIKELY IN 2019 AND THE PLAN TO MAKE MONEY FROM UNWINDING

This is what you need to know today.

No Immediate Danger From Unwinding

We have received many questions from yesterday’s post on Fed unwinding.  There is no immediate danger of a crash although a shallow correction can happen any time.  There is plenty of money to be made from the markets at this time.

Problems Likely In 2019

The Fed is split on how to unwind.  The most likely coarse is a run off, i.e., not reinvesting proceeds from maturing bond positions.

Since the Fed yet does not know what they are going to do, it is difficult to make an estimate of when the problems might occur.  As difficult as it is, we have taken time to do a comprehensive analysis because it is important to look ahead and be prepared to continue to generate unrivaled performance.

At this time the best estimate is that problems might show up in the economy in 2019.

The stock market looks ahead and may start reacting in the second half of 2018.

The Plan To Make Money From Fed Unwinding

Broadly speaking, our plan to make money from the Fed unwinding is likely to be similar to the plan used in 2007 and 2008 in the  great recession.  In 2008 when most investors lost at least 50% of their portfolio, subscribers to The Arora Report did very well, they made money by the boat load. This was accomplished by judiciously using many techniques including inverse ETFs.  Inverse ETFs go up when markets go down.

Global Rally In Stocks

U. S. stocks rallied after Yellen was dovish.  Overnight the rally has spread throughout the globe.

Gold

Gold ran up on the prospect of rates not rising as fast.  Trading this morning is listless with gold holding most of the gains.

IEA Report On Oil

International Energy Agency (IEA) is an autonomous agency based in Paris with 29 member countries.  The agency has issued a report that oil production and supply are not balancing as quickly as previously thought.  This is putting pressure on oil.

Yesterday’s EIA data was bullish but it was already discounted in the oil market from prior day’s API report.

Technical Patterns

Russian stocks are tracing a Head And Shoulder Bottom.  This is bullish.  ETF of interest is .

Silver is tracing an Island Bottom.  This is bullish.  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.

Bonds have gone up and interest rates have weakened after Yellen testimony.

Yellen testimony is also driving dollar lower.

Gold futures are at $1219, silver futures are at $15.89, and oil futures are $45.00.

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

DJIA futures are down 1  points.

STOCKS, BONDS AND GOLD RUN ON YELLEN’S PREPARED REMARKS; POSITIVE DATA FOR OIL

This is what you need to know today.

Stocks, Bonds and Gold Run On Yellen’s Prepared Remarks

Yellen’s prepared remarks have been released earlier than expected.  The remarks are for her testimony in front of the Congress later today.

The remarks are significantly dovish vs. the consensus.

Stocks, bonds and gold are running on Yellen’s dovishness.

In our experience, often new information comes out during the Q&A session.  Sometimes the markets run up on prepared remarks but back off as more information comes out during Q&A.  We will be carefully watching.

Positive Data For Oil

API data  is positive for oil.  API reported 8.133 million barrel draw vs. 3 million barrel draw consensus.

Oil is running on the data.

EIA numbers to be released at 10:30 will be the next key event.

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.

Currencies are range bound.

Gold futures are at $1222, silver futures are at $15.92, and oil futures are $45.94.

S&P 500 resistance levels are 2425, 2450 and 2500; support levels are 2400, 2363, and 2334.

DJIA futures are up/ down   points.

STOCKS, BONDS AND GOLD AWAIT YELLEN TESTIMONY

This is what you need to know today.

Stocks, Bonds And Gold Await Yellen Testimony

Yellen will testify before Congress on Wednesday and Thursday.  At a time when the Fed is making a shift to reduce its $4 trillion balance sheet, insights from Yellen’s testimony are especially critical for investors in stocks, bonds and gold.

We will be listening carefully and let you know if there are new opportunities or an action is required in the future.

Rumors

Today stocks, bonds and gold will move based on rumors about Yellen’s testimony and position adjustments by those who do not believe that their portfolios are in line with potential Yellen testimony.

You already know that we are very proactive.  All of our portfolios are positioned correctly at this time in front of Yellen’s testimony.  No action is required today on this count.

Technical Patterns

Municipal bonds are tracing a Hanging Man.  This is bearish.  ETF of interest is .

Many consumer stocks are tracing a Megaphone Top. 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.

Dollar is stronger.

Interest rates and bonds are range bound.

Gold futures are at $1211, silver futures are at $15.60, and oil futures are $44.24.

S&P 500 resistance levels are 2425, 2450 and 2500; support levels are 2400, 2363, and 2334.

DJIA futures are down 11  points.

OPPORTUNITIES FROM THE EARNINGS SEASON AHEAD, OIL MOVES ON LIBYA AND NIGERIA, GOLD STEADY

This is what you need to know today.

Opportunities From The Earnings Season Ahead

Earnings season begins this week but will take on full steam next week.  Earnings season always provides opportunities.  Major companies reporting earnings this week include , , , , , , and .  We will do individual posts as these opportunities develop.

Please remember that we do not force signals.  Forcing signals leads to sub-par performance and losses.  Over trading is one of the worst common mistakes.

Oil Moves On Libya And Nigeria

Oil is moving on a comment by the oil minister of Kuwait.  He said that Nigeria and Libya may be asked to cut production.  Under the OPEC agreement, at present, Nigeria and Libya are exempt from production quotas.

This is a positive development. However the oil market is oblivious to it as of this writing.  As a full disclosure, for this reason, ZYX Short took partial profits on the  short oil position.

Gold Steady

The momo crowd has tried many attempts to rally gold but those attempts have failed.  The ‘smart money’ is inactive.  Gold is close to the support region.  Amateurs have placed their stops below $1200.  Professionals know this.  If an opportunity arises, hunt and destroy algorithms will go into operation to take out stops.  Perhaps moving gold as low as $1183.   Please note that these algorithms will go into operation only if first there is a selling pressure on gold from another source.

Technical Patterns

Many oil and gas exploration stocks are tracing a Hammer.  This is bullish.  ETF of interest is .

Malaysian shares are tracing a Megaphone Top.  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.

Yen is weaker on comments by Kuroda.

Bonds are ticking up and interest rates are ticking down.

Gold futures are at $1209, silver futures are at $15.28, and oil futures are $43.87.

S&P 500 resistance levels are 2424, 2450 and 2500; support levels are 2400, 2363, and 2334.

DJIA futures are down 24 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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