(The Weekly Digest reproduces the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers. )
BIG MISS ON INDUSTRIAL PRODUCTION, CHINA GDP FUELED BY DEBT AND IMPORTANT WEEKEND AHEAD
This is what you need to know today.
In the U. S., Industrial Production fell by -0.6% vs. 0.0% consensus. This is a big miss. Capacity Utilization fell to 74.8% vs. 75.5% consensus.
These numbers indicate that manufacturing in the U. S. is not doing well. From an investing perspective, it is important to remember that manufacturing is only a small part of the U. S. economy.
China GDP shows the slowest growth since 2009, it came at 6.7% in line with the consensus. Digging beneath the surface, aggregate financing expanded to $360.7 billion vs. $300 billion. In simpler words, this means that economic growth is mostly being fueled by debt. This is a negative in the very long-term but positive in the short-term.
An extraordinarily important weekend is ahead. The main event is Doha meeting of oil producing nations.
Also important is that the lower house of Congress in Brazil will vote on Sunday on President Rousseff’s impeachment. If the vote favors impeachment, Rousseff will be sent to the Senate for trial.
Thee are some jitters in the oil market ahead of Doha.
Currencies, gold, silver, interest rates and bonds are range bound in quiet trading.
Our very, very short-term early stock market indicator is neutral.
Gold futures are at $1230, silver futures are at $16.19, and oil futures are $40.46.
S&P 500 resistance levels are 2100, 2111, and 2132; support levels are 2063, 2038, and 2017.
DJIA futures are down 20 points.
What To Do Now?
It is important for investors to look ahead and not in the rear view mirror.
Consider continuing to hold existing positions. Based on individual risk preference, consider holding cash 30 – 42%, and short to medium-term hedges of 30%.
There is an additional very, very short-term hedge.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.
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.
PROTECT AGAINST DOHA, OIL GLUT ENDING, SINGAPORE SENDS SHOCK WAVES, RAISING THE HEDGE AND CASH
This is what you need to know today.
Doha
Oil producing nations are meeting in Doha this weekend.
Oil has run up on optimism about the outcome of the meeting. Along with oil, stocks have also run up.
Protect Against Doha
There are various positive and negative scenarios that have a high likelihood of resulting from Doha.
We can write a book about various scenarios. However in the interest of saving subscribers time and effort, we will go straight to the action items. Please see the section titled ‘What To Do Now?’
Oil Glut Ending
The probability has increased of oil glut ending in the second half of the year. In the second half surplus is likely to go down to 200K barrels per day from current 1.5M.
For this reason, if there is a negative impact from Doha on the markets, it is likely to be temporary.
Shock Waves From Singapore
Singapore has sent shock waves by unexpectedly easing its monetary policy overnight. Singapore is important because it is the only major country in the world that targets the exchange rate of its currency instead of inflation rate that is targeted by most central banks. Singapore dollar fell by 1.2%. Most Asian currencies also fell in sympathy. MSCI Emerging Markets Currency Index dropped 0.3%.
The effect carried on to Europe. Dollar is gaining considerable strength against euro. Yen is hanging at elevated levels.
At this time currencies are the leaders. Other markets including stocks, bonds, gold, silver, and copper are following the currencies.
Economic Indicators
Core CPI came at 0.1% vs. 0.2% consensus. Yesterday we told you about negative Core PPI. The take away here is that inflation is nonexistent.
Employment in the U. S. is getting stronger. Weekly Unemployment Claims came at 253K vs. 270K consensus. This is a leading indicator and as our long time subscribers know carries a heavy weight in our models.
Markets
Gold is falling in reaction to Singapore action.
Oil is range bound ahead of Doha.
Interest rates and bonds are range bound.
Our very, very short-term early stock market indicator is neutral.
Gold futures are at $1236, silver futures are at $16.21, and oil futures are $42.01.
S&P 500 resistance levels are 2100, 2111, and 2132; support levels are 2063, 2038, and 2017.
DJIA futures are up 21 points.
What To Do Now?
It is important for investors to look ahead and not in the rear view mirror.
Consider continuing to hold existing positions. Based on individual risk preference, consider holding cash 30 – 42%, and short to medium-term hedges of 30%.
To protect against a potential negative outcome from Doha consider adding very, very short-term additional hedges for 10% of the total portfolio. Those investors who do not hedge may not specifically raise cash because there is also a high probability of a positive outcome from Doha. The best action such investors can take today is to lighten up on some positions. In other words, if you have been thinking about taking partial profits on some positions, today is the day to book those profits. It is worth remembering that unrealized profits can disappear quickly.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.
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.
WEAK DATA FROM THE U. S. BUT STRONG DATA FROM CHINA, IRON ORE SURGES
This is what you need to know today.
Lately economic data has been strong in the U. S. and weak in China. At least for today there is role reversal. The new data is weak in the U. S. but strong in China.
In the U. S., Retail Sales Ex-Auto came at 0.2% vs. 0.4$ consensus. The U. S. economy is about 70% based on consumer. For this reason retail sales are very important and carry a heavy weight in our models.
Inflation is nonexistent; Core PPI came at -0.1% vs. +0.2% consensus.
Chinese exports surged 11.5% year over year. This is the biggest rise in a year. Markets are taking comfort in this data as it shows that there is enough demand in the world to buy Chinese goods. Market in Shanghai closed up 1.4%.
Iron ore prices are surging and approaching $60 per metric ton. You may recall us writing about iron ore prices in early March. After a retracement this is another big spike up. Profits of steel mills are rising to multi year highs.
Zinc and copper are also rallying.
Gold had fallen to $1242 after having risen to about $1264 on the absence of buying by North American momo crowd this morning. This is the first day in a while that the momo crowd was not aggressively buying. Then came the weak U. S. economic data and the momo crowd is back aggressively buying. Buying is especially aggressive in silver.
Yesterday oil surged over $42 on a report from Russia that a freeze agreement had been reached between Russia and Saudi. Then came two negative developments. API inventory build was much higher than the consensus. Also Saudi is out dampening expectations for upcoming Doha meeting of oil producing nations.
Interest rates are ticking down on weak economic data.
Dollar is strengthening against euro.
Yen is slightly weaker on good Chinese data.
Our very, very short-term early stock market indicator is positive.
Gold futures are at $1247, silver futures are at $16.15, and oil futures are $41.61.
S&P 500 resistance levels are 2100, 2111, and 2132; support levels are 2038, 2017, and 2000.
DJIA futures are up 85 points.
What To Do Now?
It is important for investors to look ahead and not in the rear view mirror.
Consider continuing to hold existing positions. Based on individual risk preference, consider holding cash 30 – 42%, and short to medium-term hedges of 30%.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.
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.
IMF LOWERS WORLD GROWTH FORECAST AND SAYS REXIT IS A SERIOUS RISK, PRE-EARNINGS JITTERS
This is what you need to know today.
IMF has lowered world GDP growth forecast for 2016 from 3.4% to 3.2%. 3.4% forecast was made in January. Since then, the other data we follow has been showing lower growth. This is not a surprise to our models.
IMF says that Britain leaving European Union is a serious risk ahead.
Industrial production in India rose 2% in February vs. 0.8% consensus; consumer inflation fell to 4.83% in March vs. 5% consensus. These are very strong pieces of economic data for India. As a full disclosure, ZYX Global and ZYX Emerging have positions in India.
In Brazil, the special congressional commission voted 38 to 27 to call for continuation of the impeachment process against President Rousseff. Now the matter goes to full lower house where the vote is too close to call. Real, Brazilian currency, jumped on the news.
In the United States, stocks have pre-earnings jitters. They gave up strong gains yesterday. AA reported earnings after the market close. AA lowered its estimate of 2016 aluminum demand growth from 6% to 5%.
Dollar has gained 0.4% against the yen.
Oil gave up some of its gains after the IMF lowered its forecast but is still above $40.
Gold and silver were sold in Asia but North American momo crowd is buying them aggressively.
Interest rates and bonds are range bound.
Our very, very short-term early stock market indicator is neutral.
Gold futures are at $1261, silver futures are at $16.10, and oil futures are $40.41.
S&P 500 resistance levels are 2063, 2100, and 2111; support levels are 2017, 2000, and 1962.
DJIA futures are up 21 points.
What To Do Now?
It is important for investors to look ahead and not in the rear view mirror.
Consider continuing to hold existing positions. Based on individual risk preference, consider holding cash 30 – 42%, and short to medium-term hedges of 30%.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.
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.
EARNINGS SEASON KICKS OFF, ITALIAN BANKS ADD TO OPTIMISM
This is what you need to know today.
Q1 earnings season kicks off today with AA reporting earnings after the market close.
The consensus is that earnings will be weak. Herein lies a potential opportunity. If early earnings reports show that earnings are coming ahead of consensus number, the stock market may take off to the upside. Whisper numbers are even worse than the consensus number. For this reason even earnings coming as expected may give the market a push to the upside. However all is not clear, there still are many macro factors working against the stock market.
Advance in Italian banks is generating optimism in Europe and that optimism is transferring to New York. Shares of Monte dei Paschi rose about 10%. The Italian banks have had two problems:
- How to get rid of extensive bad loans
- How to raise new capital
The optimism is coming from the news that the Italian government is working on a plan to set up a state backed fund to provide capital to banks and to buy bad loans. As a full disclosure, ZYX Global Multi Asset Allocation has a position in Italy.
Brazil is deploying a large number of troops in Brasilia, the capital city, to contain potential riots as Congress holds votes on the impeachment of Rousseff.
In the mineral rich country of Peru, center right candidate, Fujimori wins the first round of presidential election. This is good news for many Peruvian mineral stocks including the big one SCCO.
Yen ignored rhetoric by Japanese officials to hit a new high against the dollar before retracing.
Bonds are weaker and interest rates are slightly higher.
Attempts to sell off oil have been met with persistent buying.
Gold is rising on momentum from last week. North American momo crowd is aggressively buying silver.
Our very, very short-term early stock market indicator is positive.
Gold futures are at $1252, silver futures are at $15.75, and oil futures are $40.11.
S&P 500 resistance levels are 2063, 2100, and 2111; support levels are 2038, 2017, and 2000.
DJIA futures are up 77 points.
What To Do Now?
It is important for investors to look ahead and not in the rear view mirror.
Consider continuing to hold existing positions. Based on individual risk preference, consider holding cash 30 – 42%, and short to medium-term hedges of 30%.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.
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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