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.
PROGRESS IN TRADE NEGOTIATIONS CREATING OPTIMISM
To gain an edge, this is what you need to know today.
Trade Talks
The U. S. and Chinese negotiators have made progress towards a memorandum of understanding. Talks will resume next week in Washington.
China Producer Price Index
Chinese Producer Price Index continues to decelerate. This has negative implications for lower corporate profitability and predicts lower growth.
Spain
The Spanish Prime Minister Sanchez has called a snap election as the Parliament did not back his budget. This will be the third election in four years. The good news is that investors have stayed calm and Spanish bond yields have not changed.
Momo Crowd And Smart Money In Stocks
The momo crowd is acting like a yo-yo. They were selling earlier but are buying as of this writing. Smart money is inactive.
Gold
Gold is seeing buying on talk of monetary easing in Europe. The momo crowd is buying but smart money is inactive.
Oil
The momo crowd is aggressively buying oil. Oil is breaking the resistance at $55 as of this writing. Smart money is inactive.
Marijuana
Canopy Growth (CGC) reported mixed earnings, overall in line with consensus but worse than the whisper numbers. If CGC was not a marijuana stock, considering the recent run up, the stock would have fallen significantly on these earnings. However investors are keeping faith. The future direction will depend on how the conference call goes and if the second leg of short squeeze starts.
Short interest in CGC and other marijuana stocks is extraordinarily high.
The momo crowd is aggressively buying marijuana stocks. Smart money is inactive.
Technical Patterns
Gold is tracing a flag. This is bullish. ETF of interest is GLD.
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 and bonds are ticking down.
The dollar is stronger.
Gold futures are at $1320, silver futures are at $15.60, and oil futures are $54.89.
S&P 500 resistance levels are 2765, 2800 and 2840; support levels are 2740, 2700 and 2688.
DJIA futures are up 101 points.
RETAIL SALES FALL THE MOST IN NINE YEARS TEMPERING THE ENTHUSIASM FOR THE STOCK MARKET RALLY
To gain an edge, this is what you need to know today.
Retail Sales
Retail Sales ex-auto came at -1.8% vs. 0.1% consensus. This is the biggest fall in nine years.
We exclude autos because autos are too volatile and hinder predictions.
The U. S economy is about 70% consumer based. For this reason it is important for investors to pay attention to retail sales.
Producer Price Index (PPI)
Core PPI came at 0.3% vs. 0.2% consensus. This indicates that inflation at the producer lever is running hotter. Yesterday Consumer Price Index (CPI) was tame. This indicates that inflation is rising at the producer level but is not being passed on to the consumers. If this continues, ultimately it will have a negative effect on corporate profits and in turn on stocks.
Jobless Claims
Initial Jobless Claims came at 239K vs. 225K consensus.
Momo Crowd And Smart Money In Stocks
The momo crowd is buying in the early trade. Smart money is selling into the strength.
Gold
Trading in gold is listless. There is no discernable momo crowd or smart money activity.
Oil
EIA data was bearish. However Saudi Arabia is trying hard to drive the price higher. The momo crowd is buying oil. Smart money is inactive.
Marijuana
Canopy Growth (CGC) reports earnings later today. The stock is running up ahead of earnings. The runup in CGC is causing bullishness in other marijuana stocks.
The momo crowd is buying marijuana stocks. Smart money is inactive.
Technical Patterns
Hong Kong shares are tracing an exhaustion bar. This is bearish. ETF of interest EWH. However before trading on this pattern, be aware that trade talks will move this ETF.
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.
Interest rates are ticking down and bonds are ticking up.
The dollar is slightly weaker.
Gold futures are at $1314, silver futures are at $15.54, and oil futures are $54.00.
S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.
DJIA futures are down 109 points.
TAME INFLATION DATA AND OPTIMISM OVER TRADE
To gain an edge, this is what you need to know today.
Tame Inflation Data
Core CPI came a 0.2% vs. consensus of 0.2%. This data shows that inflation is tame. This will allow the Fed to keep interest rates low until the data changes. In turn, this is positive for the stock market.
Trade Talks
There is optimism about trade talks going on in China right now.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively buying stocks. Smart money is lightly selling into the strength.
Gold
Trading in gold is listless.
Oil
API data was bullish. Traders are now waiting for EIA data that will be released at 10:30 am. The momo crowd is buying oil. Smart money is inactive.
Marijuana
There is an attempt to start another short squeeze leg. It is yet to be seen if this short squeeze attempt will fizzle or succeed. The momo crowd is buying marijuana stocks. 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 but expect the market to open higher.
Interest rates are ticking up and bonds are ticking down.
The dollar is stronger.
Gold futures are at $1313, silver futures are at $15.16, and oil futures are $53.64.
S&P 500 resistance levels are 2765, 2800 and 2840; support levels are 2740, 2700 and 2688.
DJIA futures are up 98 points.
OPTIMISM OVER GOVERNMENT SHUTDOWN DEAL AND TRADE
To gain an edge, this is what you need to know today.
Shutdown Deal
Both sides have reached an agreement in principle to avoid a government shutdown. This is creating optimism.
Trade Optimism
Optimism continues on trade negotiations with China.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively buying stocks in the early trade. Smart money is lightly selling into the strength.
Gold
The momo crowd is selling gold. Smart money is inactive.
Oil
IMF says that Saudi Arabia needs $80 to $85 oil price to balance budget. This along with the prospect of OPEC cuts is creating optimism. Oil is moving up strongly.
The momo crowd is suffering big losses in oil. Yesterday the momo crowd was selling into the weakness. Today they are buying aggressively into the strength. Smart money is inactive.
Marijuana
Aurora Cannabis (ACB) earnings were worse than the whisper numbers. Marijuana stocks are falling in the early trade. However the momo crowd continues to buy aggressively. Smart money continues to sell.
Technical Patterns
Vietnamese stocks are tracing a flag. This is bullish. ETF of interest is VNM.
Oil and gas exploration stocks are tracing an engulfing line. This is bullish. ETFs of interest are XOP and OIH.
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 strongly higher.
Interest rates are ticking down and bonds are ticking up.
Currencies are mixed.
Gold futures are at $1316, silver futures are at $15.73, and oil futures are $53.74.
S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.
DJIA futures are up 217 points.
MARKET INFLECTION POINT — BAD TRADE DEAL OR NO DEAL BUT NOT A GOOD DEAL
To gain an edge, this is what you need to know today.
The stock market is at an inflection point. All eyes are on a potential trade deal with China. How should prudent investors navigate this situation? Let’s examine with the help of a chart.
The chart
Please click here for a chart of S&P 500 ETF (SPY). Similar conclusions can be drawn from charts of Dow Jones Industrial Average (DJIA), Nasdaq 100 ETF (QQQ) and small cap ETF (IWM). Please note the following:
- The chart shows that the market is up against the resistance zone.
- The Arora Report had been projecting before the Wall Street that earnings growth was about to slow down. However, the market was slow to recognize this fact.
- The swoon in December was, in part, due to wider recognition that earnings growth was about to slow down.
- As shown on the chart, the rally this year is due to the Fed doing an about face and becoming dovish.
- RSI shows that market is overbought. Overbought markets are vulnerable to pullbacks.
- The pattern that RSI has traced is not a sign of weakness.
- Volume on the rally is lower than the volume during the swoon. On the surface this seems negative. However the volume is higher than it was during the rally of July to September of last year. This is positive.
- It makes sense to look at popular tech stocks such as Apple (AAPL), Facebook (FB), Amazon (AMZN) and AMD (AMD). These stocks have rallied strongly. Even though the momo crowd money flows remain strong, it is of note that smart money flows are weak relative to the strength of the rally.
Not a good trade deal
Let’s start with Arora’s Second Law of Investing: No one knows with certainty what is going to happen next. The only reasonable approach investors can take is to look at probabilities of various scenarios.
In this case, Trump deserves credit for taking head on an important issue. However, Trump also wants a deal as he faces re-election. Under the circumstances, here are the scenarios.
- A good deal: the probability is low because the Chinese situation is such that they cannot afford to give the U. S. a good deal.
- No deal: this is likely in the best interest of the United States for the long term as eventually China may give in. However, this will hurt Trump’s re-election. Therefore this is also a low probability scenario.
- Bad deal: by exclusion, this is the most probable scenario.
Momo Crowd And Smart Money In Stocks
The momo crowd is buying stocks in the early trade. The smart money is inactive.
Gold
The momo crowd is selling gold. Smart money is inactive.
Oil
The momo crowd is aggressively selling oil. Smart money is inactive.
Marijuana
Earnings are ahead for ACB and CGC.
Momo crowd is buying marijuana stocks. Smart money is inactive.
Technical Patterns
Brazilian stocks are tracing a hammer. This is bullish. ETF of interest is EWZ.
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 up and bonds are ticking down.
The dollar is stronger.
Gold futures are at $1308, silver futures are at $15.67, and oil futures are $52.28.
S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.
DJIA futures are up 87 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 19% – 31% and short to medium-term hedges of 5% – 15% and short term hedges of 5%.
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