WEEKLY MARKET DIGEST: OPPORTUNITIES FROM MID-TERM ELECTION AND IRAN SANCTIONS $DIA $GLD $QQQ $SLV $SPY $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.

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FED TO RAISE RATES, HOTTER INFLATION, OIL IN BEAR MARKET

To gain an edge, this is what you need to know today.

Fed To Raise Rates

The FOMC statement shows that Fed intends to raise rates in December.

Hotter Inflation

The Core Producer Price Index (PPI) came at 0.5% vs. 0.2% consensus.  Inflation at producer level is ultimately passed on to the consumer. However lately PPI has been coming hotter but Consumer Price Index (CPI) has been tame.  So far producers have not been passing on their higher costs to consumers.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively selling stocks  but smart money is inactive.  Notice that only two days ago, even when the market was up 500 DJIA points, momo crowd was aggressively buying stocks and now they are aggressively selling stocks at a lower price.  Also notice that smart money was selling stocks into the strength and now is inactive at lower price.

Gold

The momo crowd is selling gold.  Notice that the momo crowd was aggressively buying gold $20 higher and is now selling gold at a lower price.

Inflation data came hotter than expected.  Inflation is good for gold in the long term.  However since 2011, momo crowd’s behavior has been to sell gold on higher inflation data and buy gold on lower inflation data.

Oil

Oil has broken $60 support and is now in a bear market.

Marijuana

Marijuana stocks have fallen from their peak.  Our call on marijuana stocks has proven spot on.

The momo crowd is still aggressively buying marijuana stocks. The smart money is now lightly selling marijuana stocks.

Technical Patterns

Oil is tracing a megaphone top.  This is bearish.  ETF of interest is USO.

Oil exploration stocks are tracing a flag. This is bearish. ETF of interest is XOP.

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 negative.

The  dollar is stronger.

Interest rates are ticking down and bonds are ticking up.

Gold futures are at $1212, silver futures are at $14.19, and oil futures are $59.59.

S&P 500 resistance levels are 2800, 2840 and 2860; support levels are 2765, 2740 and 2700.

DJIA futures are down 122 points.

THE FED DAY, BIGGEST MIDTERM RALLY SINCE 1982, PEAK GOOD NEWS FOR MARIJUANA

To gain an edge, this is what you need to know today.

Fed Day

The Fed will announce its policy decision at 2:00 pm ET.  We will be reading the tea leaves to keep you informed of the future direction.

Biggest Rally

Yesterday was the biggest one-day rally after a midterm election since 1982.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying stocks.  Smart money is selectively selling into the strength.

Gold

The momo crowd is aggressively selling gold.

Oil

Oil is under pressure after bearish inventory data.

Marijuana

Resignation of Sessions  is good for marijuana.  Be careful buying marijuana stock here as the peak good news can hurt you.  The momo crowd is aggressively buying marijuana stocks but smart money is selling them.

We will do a separate detailed post later on peak good news.

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 negative but can quickly turn.

Interest rates, bonds and currencies are range bound.

Gold futures are at $1222, silver futures are at $14.39, and oil futures are $61.64.

S&P 500 resistance levels are 2840, 2860 and 2918; support levels are 2765, 2740 and 2700.

DJIA futures are down 73 points.

MOMO BUYS STOCKS BUT BE CAREFUL, BIG MARIJUANA VICTORIES

To gain an edge, this is what you need to know today.

Midterm Elections

Midterm election results were in line with consensus.  Now the uncertainty is lifted and thus stocks are rising.

Marijuana

Midterm elections were great for marijuana. Michigan with 10 million people approved recreational use of marijuana. Missouri and Utah approved medical use. Pete Sessions, the Congressman who consistently blocked pro-marijuana votes, was defeated.

Great wins but the biggest prize is still ahead. The biggest prize for marijuana is federal legalization. There is no doubt that some investors will make millions in marijuana but the hard truth is that many more will lose their shirts due to high volatility, pump and dump schemes and faulty analysis. First please read the 11 points to make millions in marijuana  previously published.  We will be doing a detailed post in ZYX Buy and ZYX Short and perhaps in ZYX Global if there are a lot of subscriber requests.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying stocks but the smart money is selectively selling into the strength.

Gold

Gold is volatile based on moves in the dollar.

Oil

Oil remains under pressure as Trump’s hand is strengthened.

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 but can quickly turn negative.

Interest rates and bonds are range bounds.

Gold futures are at $1230, silver futures are at $14.62, and oil futures are $62.61.

S&P 500 resistance levels are 2800, 2840 and 2860; support levels are 2765, 2740 and 2700.

DJIA futures are up 129 points.

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BULLS HOPING FOR A POST-ELECTION RALLY ESPECIALLY IN MARIJUANA BUT DON’T BE SO SURE

To gain an edge, this is what you need to know today.

Post-Election Rally

Bulls are hoping for a big post-election rally especially in marijuana stocks.  It makes sense for the following reasons:

  • Positive seasonality.
  • Historical precedence.
  • Uncertainty will be lifted.
  • Cash on the sidelines.
  • Short squeeze.

The consensus among bulls is that the rally will ensue irrespective of the election results.

In our analysis, bulls should not be so confident for the following reasons:

  • Three headwinds we described in yesterday’s Morning Capsule.
  • Anti Trump hearings if Democrats win big.
  • The U. S. may lose the leverage with China if Democrats win big.
  • The first reaction to election results may not be the right reaction and may reverse.

If Republicans win big, then the probability of a strong rally is very high.

Keep in mind that after nine years, there are indications that the character of this market is beginning to change.

Marijuana

Voters in Michigan and North Dakota will decide on use of recreational marijuana.  Michigan is the big prize with the population of 10 million.

Missouri and Utah will decide on medical marijuana.

Marijuana stocks are being aggressively bought in anticipation of positive outcomes in all ballot measures.

Investors should not be so sure that all measures will pass.  Further take a look at the following:

  • When Canada voted to legalize marijuana, marijuana stocks fell.
  • When Canada legalized marijuana, marijuana stocks fell.

The precedence indicates that there is too much risk to buy marijuana stocks before the election results are known.  Further post election reaction will have to be carefully watched in view of the precedence.

Europe PMI

Purchasing Managers Index for the euro area fell to 53.1 vs. 54 consensus.  This is the lowest level since 2016.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying in the early trade.  Smart money is lightly and selectively selling but also selectively buying.

Gold

Gold is seeing buying on dollar weakness.  The momo crowd is acting like a yo-yo.  Yesterday they were selling gold. This morning they are buying gold.

Oil

Trading in oil is listless.

Technical Patterns

Brazilian shares are tracing an inside bar.  This is bearish.  ETF of interest is EWZ.  However do not act until the results of the U. S. election are known.

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.

Interest rates are ticking down and bonds are ticking up.

Dollar is weaker.

Gold futures are at $1237, silver futures are at $14.68, and oil futures are $62.84.

S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.

DJIA futures are down 28 points.

OPPORTUNITIES FROM MID-TERM ELECTION AND IRAN SANCTIONS

To gain an edge, this is what you need to know today.

Opportunities From Mid-Term Election

Forecasting the election results is a hazardous business. Predicting stock market reaction to an election is doubly hazardous. The Arora Report was a rare service that called not only Brexit results correctly ahead of time but also correctly bought the market dip. When Wall Street had ordained Hillary Clinton as the president before the election, The Arora Report was again a rare service to not buy into it.   On Trump victory, The Arora Report gave a buy signal at a time when many were predicting a doom for the stock market. So what is The Arora Report saying about the mid-term election?

We are data driven and the data is inconclusive.  Here are the two main points from the consensus.

  • The consensus right now is that irrespective of who wins, the market will go up. The reason is that the market hates uncertainty and after the election is over the uncertainty will be lifted going into a seasonally strong period. However, there are three big reasons for caution, please read on.
  • The consensus is that if Republicans win, market will go much higher than if Democrats win.

Tech stocks have been generals of this market. It makes sense to take a look at them before the election especially after the shocking announcement from Apple to hide iPhone unit sales numbers has now colored many tech stocks.

Please click here for the chart of money flows in 11 popular tech stocks. Please note the following:

  • The money flows correctly called the recent dip in tech stocks.  We called this dip ahead of time in September and asked you to pay heed to the warning signal.
  • The chart shows that the money flows in Apple are neutral but the momo crowd money flows are negative. If Republicans win big, it will strengthen Trump’s hand in negotiating with China. Any favorable trade deal with China will have a positive impact on Apple, Intel (INTC), AMD (AMD), Microsoft (MSFT) and NVIDIA (NVDA). The chart shows both smart money and momo crowd money flows in these stocks.
  • The chart shows that money flows in Amazon (AMZN) are neutral but mild positive in Facebook (FB) and Google (GOOG) (GOOGL). Trump is again talking about antitrust actions against Amazon. This time he is also adding Google and Facebook to his list. If Trump wins big, these stocks may see negative headlines from time to time and come under pressure.
  • Tesla (TLSA) has neutral smart money flows but will benefit if Democrats win big. Democrats tend to be more pro electric cars.
  • Smart money flows are mild positive in Alibaba (BABA). If Trump wins, a trade deal may occur sooner and that may be positive for Alibaba.
  • Netflix (NFLX) is not likely to be directly affected by the election.

In addition to tech stocks, the election results will provide opportunities in many other sectors. For example, defense stocks represented by ETF (ITA) may move with specific opportunities in Lockheed Martin (LMT), Northrop Grumman (NOC), Raytheon (RTN) and Boeing (BA). Industrial stock such as United Technologies (UTX) and Caterpillar (CAT) may benefit from a Republican win. Health insurers such as Centene (CNC), Molina Healthcare (MOH) and WellCare Health (WCG) may benefit if Democrats win. Pharmaceutical stocks such as Pfizer (PFE), Lilly (LLY) and Merck (MRK) may not like a Democrat win. Biotech ETFs such as (IBB) and (XBI) along with companies such as Amgen (AMGN), Celgene (CELG) and Regeneron (REGN) may get hurt if Democrats win.   Very short term traders may find opportunities in leveraged ETFs such as (LABU) and (LABD).

The foregoing are just a few opportunities that may arise both in the long term and the short term.

Headwinds

There are three major headwinds.

  • Rising interest rates.
  • Slowing earnings growth momentum.
  • The character of the market is changing over the coming years compared to the rip roaring bull market of the last nine years. Investors need to de-risk their portfolios in a measured way and fine tune their skills as well as resources now to get ready for what is to come.

Money Flows

Money flows in broad based ETFs such as S&P 500 ETF (), Nasdaq 100 ETF () and small cap ETF () have been mild positive. Cumulative money flows in the 30 constituents of Dow Jones Industrial Average () have now turned neutral.

Momo Crowd And Smart Money In Stocks

The momo crowd is buying stocks in the early trade.  Smart money is inactive.

Gold

The momo crowd is selling gold. Smart Money is inactive.

Oil

Iran sanctions have gone into effect.  It is not impacting the oil market much as of this writing because Trump gave exemptions to eight counties to import oil.

Marijuana

Aphria is now trading on NYSE under the symbol APHA.  Many marijuana stocks including the big cap ACB were highly pumped Friday afternoon and buying continued in after hours. We will have to see if they get dumped after the pump.  Momo crowd actions are mixed. Smart money is inactive.

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 neutral.

Interest rates and currencies are mixed.

Gold futures are at $1230, silver futures are at $14.66, and oil futures are $63.76.

S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.

futures are up 1  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 holding cash or treasury bills 23% – 33% and short to medium-term hedges of  10% – 15% and short term hedges of 3%.

 

A knowledgeable investor would have turned $100,000 into over $1,000,000 with the help from The Arora Report. NOW YOU TOO CAN ALSO SPECTACULARLY SUCCEED AT MEETING YOUR GOALS WITH THE HELP OF THE ARORA REPORT. You are receiving less than 2% of the content from our paid services. …TO RECEIVE REMAINING 98% INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES, TAKE A FREE TRIAL TO PAID SERVICES.

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