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.
PAY ATTENTION TO THE LOWEST JOBLESS CLAIMS SINCE 1973, LOW LIQUIDITY
To gain an edge, this is what you need to know today.
Lowest Claims Since 1973
Initial Jobless Claims came at 215K vs. 230K consensus. This is the lowest level since 1973.
From a practical point of view, investors ought to consider the following:
- Be highly selective about stocks and ETFs in your portfolio.
- Take less risks.
- Stay away from or reduce interest rate sensitive stocks and ETFs. Examples are utilities and REITs. The exceptions are special situations.
- Stay away from high dividend stocks unless it is a special situation.
- Focus on dividend growth and not absolute dividends.
- Give precedence to price appreciation over dividends.
- Focus on special situations.
- Focus on emerging markets and other developed markets outside the United States. ZYX Emerging continuously covers emerging markets. Real growth is in emerging markets.ZYX Global often has some international picks.
- International markets are tricky because of currency fluctuations.
- International markets also tend to be more volatile.
- When stepping into international markets, be prepared to exercise more patience and you will need more expert guidance.
The following are the reasons behind the foregoing pointers:
- Shortage of labor will increase wages and in turn reduce profitability of some U. S. corporations.
- Tightness in the labor market will prompt the Fed to raise interest rates at a faster pace.
- Shortage of labor will stunt growth in the U. S.
- There is plenty of labor available in emerging markets.
Low Liquidity
Due to the holiday, markets are likely to have low liquidity. The market moves in low liquidity periods are not to be trusted.
Momo Crowd And Smart Money
The momo crowd is aggressively buying in the early trade.
The smart money is inactive.
Gold, Oil, Bonds And Currencies
Preholiday trading is lackluster.
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 but expect the market to open higher.
Gold futures are at $1329, silver futures are at $16.25, and oil futures are $64.34.
S&P 500 resistance levels are 2631, 2661 and 2688; support levels are 2615, 2594, and 2550.
DJIA futures are up 97 points.
BUDDING RALLY KILLED BY A REPORT THAT TRUMP MAY GO AFTER AMAZON
To gain an edge, this is what you need to know today.
Budding Rally Killed
This morning a rally was beginning to develop. The rally attempt was triggered by positive developments at Facebook (FB) regarding privacy settings. Then came a report about Trump going after Amazon (AMZN), this report has killed the rally.
Trump May Go After Amazon
There is a rumor that Trump may go after Amazon. This is turning the sentiment more negative on tech stocks. To be fair, this news is not new. The new twist here is that Trump apparently wants to go after Amazon to protect small business. Jeff Bezos owns The Washington Post. The Washington Post has done several negative articles about Trump.
Smart Money And Momo Crowd
Smart money has been inactive. If you have been following along, you already know that smart money lightened up during the rallies earlier this year.
The momo crowd was aggressively buying yesterday morning and aggressively selling yesterday afternoon. This morning the momo crowd was first buying aggressively. However after the Trump report, momo crowd is selling aggressively.
Gold
Gold is seeing considerable selling as the dollar strengthens on the GDP number.
Oil
Short squeeze in oil is over. This is causing oil to drift down.
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 and expect the market to be very volatile on both sides.
Interest rates are ticking down and bonds are ticking up.
Gold futures are at $1333, silver futures are at $16.36, and oil futures are $64.88.
S&P 500 resistance levels are 2631, 2661 and 2688; support levels are 2594, 2550, and 2500.
DJIA futures are up 52 points.
A LOOK UNDER THE SURFACE OF THE MARKET RISE, WINDOW DRESSING AHEAD
To gain an edge, this is what you need to know today.
Short Squeeze
About one-half of yesterday’s big market rise was short squeeze. The other half was momo crowd buying.
This morning in the early trade, short squeeze and aggressive momo buying continues.
A short squeeze occurs when short sellers scramble to buy to cover. Their buying is artificial in the sense that they have no choice. This adds fuel to generate short term spectacular moves to the upside.
What we know with 100% certainty is that short squeezes end and deprive the market of the fuel for further rise.
As we shared with you in yesterday’s morning capsule and a subsequent post with charts showing the VUD indicator, the strength in the VUD indictor during Friday’s decline correctly predicted the up move yesterday. As of this writing, the VUD indicator is not as strong and beginning to show some weakness with futures up strong in the early trade.
The smart money was mostly inactive yesterday and is inactive in the early trade this morning.
Window Dressing
Short squeeze may be close to running its course, but window dressing is starting in full swing. In window dressing, money managers buy stocks that have performed well to show their clients in their quarterly reports that they are holding good stocks. At the same time, money managers sell the stocks that have not performed well because they do not want to show clients their holdings of poor performing stocks.
In a bull market, window dressing exerts upward pressure on the market during the last few days of the quarter.
Gold
After strong gains yesterday, gold is losing some of its luster in the early trade. The reason is that the dollar is getting stronger. Gold moves inverse to the dollar.
Oil
Oil is strongly moving up on missiles being fired at Saudi Arabia from Yemen. Yemen is a proxy for Iran. There is a concern for a broader war in the Middle East.
Interestingly, as oil has moved up on war concerns, the momo crowd in the stock market is oblivious.
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 but expect the market to open up higher.
Interest rates are ticking down and bonds are ticking up.
Gold futures are at $1342, silver futures are at $16.42, and oil futures are $66.16.
S&P 500 resistance levels are 2688, 2700 and 2740; support levels are 2661, 2631 and 2615.
DJIA futures are up 89 points.
TRADE WAR LESS LIKELY, SMART MONEY BOUGHT IN THE BIG DIP, MOMO BUYING MUCH HIGHER
To gain an edge, this is what you need to know today.
Trade War Less Likely
Trade war is less likely and money flows are confirming it. We will do a separate post on this subject.
Smart Money And Momo Crowd
Smart money lightly bought in the closing minutes on Friday when the market was down over 1100 DJIA points over a two day period.
The momo crowd was aggressive sellers near the lows on Friday. This morning with DJIA likely to open up about 360 points, momo crowd is aggressively buying.
The smart money is inactive right now.
Gold And Oil
Money continues to flow into gold and oil. However if there is a sustained rally in stocks, gold may pull back. On the other side, there is a perfect set up for a short squeeze in gold. If such a short squeeze occurs, gold may technically breakout bringing in new buyers and driving gold much higher.
Technical Patterns
Several technology stocks appear to be forming a Megaphone Top. This is bearish. ETF of interest is XLK.
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.
Interest rates are ticking up and bonds are ticking down.
Gold futures are at $1345, silver futures are at $16.63, and oil futures are $65.72.
S&P 500 resistance levels are 2631, 2661 and 2688; support levels are 2615, 2594, and 2550.
DJIA futures are up 286 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 22% – 37% and short to medium-term hedges of 15% – 25% and very short term hedges of 23%.
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