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.
BE CAREFUL— THE MARKET HAS NOT DONE THE NECESSARY CLEANSING, JOBS REPORT, $100 BILLION TRUMP THREAT
To gain an edge, this is what you need to know today.
Market Has Not Cleansed, Be Careful
In our over 30 years in the markets, one of the biggest mistakes we have seen investors make is to not listen to the message of the markets. Often investors tend to force their opinions on the markets instead of listening to what the markets are telling them. This is an important concept right now because markets are highly volatile and not listening to the message of the markets can be disastrous.
When markets are highly volatile, it is usually better to buy after the cleansing with the exception of short term trades. Let us explore with the help of two charts.
Please click here for a chart of S&P 500 (SPY). Similar conclusions can be drawn from the charts of Dow Jones Industrial Average (DJIA), Nasdaq 100 ETF (QQQ) and small cap ETF (IWM).
Please click here for a chart of S&P 500 futures published at the time of the market dip in February. For the sake of transparency, this chart is exactly the same as previously published without any change.
Please observer the following from the charts:
- The recent rally is on low volume.
- The 1000 DJIA point rally occurred from a condition that was not oversold as shown on the chart.
- The recent market downdraft has been accompanied by low volume.
- The February downdraft was accompanied by heavy volume as shown on the chart.
- During the February downdraft, market rallied from an oversold condition.
- During the February downdraft, RSI formed a double bottom.
- During the February downdraft the market formed a ‘W’ pattern visible on the futures chart linked above. A ‘W’ pattern is short term bullish. As the pattern forecasted, the market rallied in the short term.
The sum total of the observations from the charts is that the market has not yet cleansed. Cleansing would have occurred if the volume was heavy, the market rallied from an oversold condition, a bullish pattern such as a ‘W’ formed and sentiment became negative. None of these conditions have been met.
Jobs Report
March Non-farm Private Payroll came at 102K vs. 180K consensus. On the surface, this number signals a significant slowdown in U. S. employment. However digging below the surface, February Non-farm Payrolls were revised upwards to 320K from 287K originally reported.
Based on these numbers, there is no immediate cause for worry but investors ought to keep a close eye.
A better way is to keep an eye on weekly jobless claims and their analysis that we publish.
Trump $100 Billion Threat
Trump is threatening China with tariffs on an additional $100 billion worth of goods.
Momo Crowd And Smart Money
The momo crowd first aggressively sold on the news of the Trump threat driving DJIA futures down over 400 points. As the market recovered, the momo crowd started buying aggressively.
The smart money is inactive.
Gold
Gold is volatile. On one hand weaker employment and trade war with China is good for gold. On the other hand, a stronger dollar is bad for gold.
Perverse Dollar Behavior
Based on the news and the data, dollar should have weakened. However in a perverse behavior, the dollar is strengthening. Such perverse behavior often occurs if major players are all positioned on one side. When a slight shift occurs, they end up reversing the course quickly.
Oil
Oil is volatile moving in close correlation to the S&P 500.
Technical Patterns
Oil service stocks are showing a Continuation Wedge. This is bullish. ETF of interest is OIH.
Mexican stocks are tracing a Shooting Star. This is bearish. ETF of interest is EWW.
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 reverse based on new developments and rumors as well as on short squeeze.
Bonds are ticking up and interest rates are ticking down as would be expected after a weak jobs report
Gold futures are at $1331, silver futures are at $16.40, and oil futures are $63.25.
S&P 500 resistance levels are 2661, 2688 and 2700; support levels are 2631, 2615, and 2594.
DJIA futures are down 221 points.
700 POINT POSITIVE REVERSAL, NEW DATA SHOWS HIGHEST TRADE DEFICIT SINCE 2008, TAKE PARITAL PROFITS ON HEDGES
To gain an edge, this is what you need to know today.
Take Partial Profits On Hedges
Take partial profits on another 3% of very short term hedges.
700 Point Positive Reversal
In yesterday’s Morning Capsule we wrote
(Market) can quickly turn if there are rumors of positive developments on the trade front.
After being down over 500 points, market closed up over 200 points. The reason for the positive reversal was easing of trade war fears.
Highest Trade Deficit Since 2008
This morning the news is that February Trade Deficit came at $57.6 billion vs. $56.7 billion consensus. This is the highest deficit since October 2008.
Momo Crowd And Smart Money
The momo crowd is ignoring the news about higher trade deficit and is aggressively buying. Buying is especially aggressive in some FAANG stocks such as FB and AMZN.
The momo crowd has lost a lot of money by getting whipsawed. However the market is still mostly controlled by the momo crowd.
The smart money is inactive.
Jobless Claims
Initial Jobless Claims came at 242K vs. 225K consensus. Higher claims are not of concern as we look at a moving average of the claims.
Gold And Bonds
Gold and bonds are sliding as money comes out of them into stocks. The momo crowd is aggressively selling both gold and bonds.
Oil
Oil has moved up with the stock market. The momo crowd is an aggressive buyer.
Technical Patterns
Technology stocks are tracing a Continuation Wedge. This is bullish. 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 neutral but expect the market to open higher.
Interest rates are ticking up.
Dollar is stronger.
Gold futures are at $1330, silver futures are at $16.80, and oil futures are $63.19.
S&P 500 resistance levels are 2661, 2688 and 2700; support levels are 2631, 2615, and 2594.
DJIA futures are up 90 points.
CHINA THREAT ON TRADE RATTLES THE MARKETS, GOLD AND BONDS BENEFIT
To gain an edge, this is what you need to know today.
The China Threat
China plans to impose additional duties on U. S. products such as planes, cars, chemicals and soybeans. This is in response to U. S. tariffs on Chinese goods. Markets are rattled on the prospects of a trade war.
Smart Money And Momo Crowd
The momo crowd is aggressively selling.
The smart money is inactive.
Gold And Bonds
Money is moving into safe havens of gold and bonds. The momo crowd is aggressively buying gold. The smart money is inactive.
Oil
Oil is being sold on the prospects of a trade war.
Other Economic Data
There is fair amount of other economic data that would normally be market moving but today it is not going to make any difference.
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 if there are rumors of positive developments on the trade front.
Gold futures are at $1350, silver futures are at $16.47, and oil futures are $62.52.
S&P 500 resistance levels are 2594, 2615 and 2631; support levels are 2550, 2500, and 2450.
DJIA futures are down 528 points.
A BOUNCE WITHOUT CAPITULATION IS NOT HEALTHY, TAKE PARTIAL PROFITS ON HEDGES
To gain an edge, this is what you need to know today.
A Bounce
Expect a bounce in the market this morning.
A bounce without capitulation is not healthy. This morning’s bounce is coming without a capitulation yesterday. This is not healthy.
Please click here for a chart of S&P 500 ETF (SPY).
Please observe the following from the chart:
- The chart shows that during the February correction, volume became heavy. This indicated capitulation and the potential of a bounce. A bounce is exactly what happened as called by the chart.
- During the recent market swoon, the volume has not been heavy. This indicates that there is no capitulation at this time.
- The chart shows that during the market correction in February, the market got oversold. Oversold markets tend to bounce and this is exactly what happened.
- During the current swoon, the market is not oversold.
- On January 26, 2018, which has turned out to be the top of the market, up to 69% of The Arora Report portfolios were protected. The chart shows three components of the protection and the specific amounts.
- Protection is dynamic and changes.
- Before the latest swoon, up to 85% of The Arora Report portfolios were protected. The chart shows three components of the protection and the specific amounts.
The foregoing indicates that there is significant need for protection at this time.
Momo Crowd And Smart Money
The momo crowd is aggressively buying in the early trade.
The smart money is inactive.
There was extremely light buying by smart money when Dow dipped over 700 points yesterday. But the buying stopped when the Dow started moving up.
New Quarter Money
In yesterday’s morning capsule, we shared with you that new quarter money would provide support in the afternoon. This is exactly what happened.
At its worst, DJIA was down 759 points yesterday afternoon. Then new quarter money kicked in causing a rise of 300 points from the low.
The new quarter money continued to buy in the after market and continues to pour in the market in the early trade. This is largely responsible for the bounce this morning.
Gold
Gold is giving up some of its gains from yesterday as money moves into stocks.
Oil
Oil lost the gains it made from the short squeeze.
Take Partial Profits On Hedges
Consider taking partial profits on 4% of very short-term hedges. Please see What To Do Now section below.
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 reverse quickly.
Interest rates are ticking up and bonds are ticking down.
Dollar is slightly stronger.
Gold futures are at $1341, silver futures are at $16.51, and oil futures are $63.29.
S&P 500 resistance levels are 2615, 2631 and 2661; support levels are 2550, 2500, and 2450.
DJIA futures are up 165 points.
RALLY ATTEMPT FIZZLES ON CHINA TARIFFS, NEW MONEY, GOLD OUTLOOK
To gain an edge, this is what you need to know today.
China Retaliates
China is retaliating against U. S. tariffs on Chinese steel and aluminum.
China will impose tariffs on about $3 billion of U. S. imports. Tariffs will be put on products ranging from pork and fruit to steel pipes.
New Quarter Money
New quarter money will pour into the market over the next three days providing some support.
Rally Fizzles
A rally attempt started in Asia on prospects of new quarter money coming into the stock markets. Normally the rally would have carried to the United States. However the early rally in Asia fizzled on China tariffs.
The Momo Crowd And Smart Money
The smart money is inactive in early trade.
The momo crowd is selling.
Gold
The two primary factors affecting gold right now are weakness in the dollar and volatility in the stock markets across the world.
Gold is priced in dollars. Gold moves inverse to the dollar. Lately the dollar has been weak and this has helped gold.
Stock markets across the world have been very volatile. When stock markets drop, some money moves into gold. Gold is considered a safe haven.
These two factors have been highly supportive of gold. If they continue to be supportive, gold has a good shot of breaking the technical resistance around $1360. If this resistance is broken, the next target will be $1400.
In the early trade, the momo crowd is buying gold aggressively. There was mild smart money buying in Asia but the smart money buying has stopped as of this writing.
Oil
The momo crowd is aggressively buying oil.
The smart money is inactive.
Technical Patterns
South African stocks are tracing a Engulfing Line. This is bullish. ETF of interest is EZA.
Consumer staple stocks are tracing a Shooting Star. This is bearish. ETF of interest is XLP.
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 down. However new quarter money is going to start pouring in, especially in the afternoon, such buying may drive the market higher. Professional traders may also front run the new quarter money by buying into the dip.
Interest rates are ticking up and bonds are ticking down.
Currencies are range bound.
Gold futures are at $1338, silver futures are at $16.61, and oil futures are $64.94.
S&P 500 resistance levels are 2661, 2688 and 2700; support levels are 2615, 2594, and 2550.
DJIA futures are down 127 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 16%.
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.
Please click here to take advantage of a FREE 30 day trial.
Check out our enviable performance in both bull and bear markets.
