WEEKLY MARKET DIGEST: N. KOREA NUKE AND ECB CAUSE DROP IN STOCKS, SMART MONEY WAKES UP IN OIL $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO

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  WEEKLY MARKET DIGEST: NORTH KOREAN BOMB AND ECB LIKELY TO LEAD TO DROP IN STOCKS, SMART MONEY WAKES UP IN OIL $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.

NORTH KOREAN BOMB AND ECB LIKELY TO LEAD TO DROP IN STOCKS, SMART MONEY WAKES UP IN OIL

This is what you need to know today.

North Korean Bomb

North Korea has successfully tested its fifth atomic bomb and claims that the bomb is small enough to be put on a missile head.  The stock market has fallen Seoul and causing a cloud everywhere else.

ECB

We were able to give you our analysis yesterday quickly as ECB press conference was in progress.  Well, it took Wall Street about a day to figure out the same analysis.  The prospect that ECB may not ease further is roiling the markets.

Oil

Yesterday we wrote in ZYX Short,

Oil moved up a lot first on API inventory draw (please see the Morning Capsule), then took a second leg up on EIA inventory draw. EIA draw came at -14.5 million barrels vs. consensus of a build of  +0.5 million barrels.

Less knowledgeable traders are buying on the headlines without looking below the surface.  These are backward looking sets of data for a week when a significant amount of production in the Gulf of Mexico was shut down on the threat of a hurricane.  All of the shut down production has been resumed and there has been no damage to oil rigs.

Theoretically, next week there will not be draw downs like this week and oil will reverse.

Further, there are a lot of smart people in the oil market. Sooner or later an institution with enough horse power will figure out the foregoing and start selling.

We got our subscribers positioned in a short trade yesterday.  This morning the smart money has figured out the same thing and is selling oil.

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Markets

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

Oil has fallen under $47.

Gold has broken support at $1340.

Dollar is stronger

Interest rates are rising and bonds are being sold.

Gold futures are at $1338, silver futures are at $19.52, and oil futures are $46.80.

S&P 500 resistance levels are 2200, 2222 and 2250; support levels are 2150, 2132, and 2120.

DJIA futures are down 103 points.

STOCKS TO DROP AS MARKET READS TEA LEAVES FROM SUPER MARIO’S STATEMENT

This is what you need to know today.

Super Mario

Mario Draghi,  Chief of European Central Bank, is also known as Super Mario due to his ability to move markets higher just by talking.

This morning ECB left all three rates unchanged as expected. In the press conference, Draghi stated that QE will continue to March 2017 or beyond.  Market is reading the tea leaves of this statement and coming to grips with the possibility that QE may not continue beyond March 2017.

Nasdaq 100 Futures, which were the strongest major market yesterday and this morning, gave up about 20 points to a low of 4810 before rebounding.

Gold And Silver

Smart money sold gold and silver on Draghi statement.  When gold fell to $1346, momo crowd stepped in to aggressively buy gold.

Uber Bullish Data On Oil

Yesterday at 4:30 pm API inventory data showed a drop of 12.08 million barrels vs. a build of 1 million barrels consensus.  This data is uber bullish for oil.  Oil immediately jumped over $46 and has so far sustained the gains.

EIA data will be released at 11:00 am this morning and may temper the enthusiasm for oil if the data is not uber bullish.

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Jobless Claims

Initial Jobless Claims came at 259K vs. 265K consensus.  This is a leading indicator and carries heavy weight in our models.

Markets

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

Euro is screaming higher over $1.13 on Draghi comments.

Interest rates are ticking higher and bonds are ticking lower. Bonds likely to drop further.

Gold futures are at $1346, silver futures are at $19.86, and oil futures are $46.21.

S&P 500 resistance levels are 2200, 2222 and 2250; support levels are 2165, 2150, and 2132.

DJIA futures are down 64  points.

GOLD AND COMMODITIES ROCKET ON WEAK ECONOMIC DATA BUT WILLIAMS WANTS RATE HIKE

This is what you need to know today.

Weak Data

After weak Friday’s employment report, ISM Services Data was weak yesterday.

Williams

San Francisco Fed President Williams wants to raise rates in spite of weak data.

The reasoning is that a couple of weak data points do not justify keeping interest rates low at emergency levels. There is no economic emergency.

Gold And Commodities

Gold and commodities rocketed yesterday and continue to see a lot of buying this morning on the assumption that the Fed will never raise interest rates.

Markets

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

Dollar is weaker.

Interest rates and bonds are range bound.

Gold futures are at $1355, silver futures are at $20.05, and oil futures are $45.16.

S&P 500 resistance levels are 2200, 2222 and 2250; support levels are 2165, 2150, and 2132.

DJIA futures are down 3 points.

SAUDI-RUSSIA OIL PACT WITH SUPPORT FROM IRAN, A NEW TWIST IN PRESIDENTIAL ELECTION

This is what you need to know today.

Saudi-Russia Pact

Saudi and Russia have reached an oil pact to stabilize crude oil market.  Iran is out cautiously in support of a freeze.   The idea is to freeze oil production for a limited period of time such as three months.

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Yesterday on the news WTI spiked to $46.50 but has now pulled back to $44.19.  Brent spiked on the news to $49.32 and has now pulled back to $46.66.

The pull back is occurring as traders face the reality of high inventories.

Not So Fast!

Over the last month markets have mostly decided that Clinton will win.  A CNN/ORC poll out this morning is showing Trump 2 points ahead of Clinton.

If Trump starts gaining steam,  there will be new investment opportunities as markets shift from their current posture of discounting a Clinton victory.

Australia

The Reserve Bank of Australia left rates unchanged in line with expectations.

Gold And Silver

There is heavy buying in gold as gold broke resistance at $1330.  There is also heavy buying in silver as silver broke heavy resistance at $19.50.

Markets

Our very, very short-term early stock market indicator is neutral but expect market to open higher.

Currencies, interest rates and bonds are range bound.

Gold futures are at $1337, silver futures are at $19.69, and oil futures are $44.19.

S&P 500 resistance levels are 2200, 2222 and 2250; support levels are 2165, 2150, and 2132.

DJIA futures are up 26  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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