WEEKLY MARKET DIGEST: PROSPECTS OF RATE CUTS SUPPORTS STOCKS, BE CAUTIOUS, FDA CBD DAY $DIA $GLD $QQQ $SLV $SPY $TBT $USO

WEEKLY MARKET DIGEST: PROSPECTS OF RATE CUTS SUPPORTS STOCKS, BE CAUTIOUS, FDA CBD DAY $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.

MEXICO TARIFFS DO NOT CHANGE THE ACTION ITEM FOR PRUDENT INVESTORS, CHINA PMI, FDA CBD DAY

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

The surprise announcement by President Trump of imposing new tariffs on goods imported from Mexico does not change the previously prescribed action item for investors. Let us examine with the help of a chart.

Please click here for the annotated chart of Nasdaq 100 ETF (QQQ). Similar conclusions can be drawn from the charts of Dow Jones Industrial Average (DJIA) and S&P 500 ETF (SPY). For the sake of full transparency, the chart is exactly the same that was previously published before the current downturn in the stock market. Please note the following:

  • I have previously written that the technical analysis no longer works as well as it used to. For reasons please click here. However there is still significant value in technical analysis when done right and combined with fundamental, quantitative and macro analysis.
  • At the time of the publication of the chart, the surprise announcement of tariffs on Mexico was not known. The chart was also published in advance of the recent downturn. However the chart foretold the risks.
  • The chart showed failure of the rally.
  • The chart showed the Arora call to buy inverse ETF (PSQ) that goes up when the market goes down, or short Nasdaq 100 ETF QQQ.
  • The chart showed the Arora calls to raise cash and hedges.
  • RSI on the chart showed only a weak bounce from the oversold condition. This was foretelling more downside.

Stocks To Watch For Clues

For clues, consider watching stocks of car companies such as General Motors (GM), Ford (F) and Fiat Chrysler (FCAU).

Tariffs on Mexico should not have any major impact on popular tech stocks such as Apple (AAPL), Google (GOOG) (GOOGL) and Amazon (AMZN). It should also not have any major impact on semiconductor stocks such as Intel (INTC), AMD (AMD), Micron (MU) and Qualcomm (QCOM). Movements in tech stocks will continue to correlate to China.

The Action Item

The action item for prudent investors has not changed from what was previously prescribed. We previously wrote:

All investors ought to consider taking appropriate measures to protect their portfolios.

Please scroll down to see the ‘What To Do Now’ section.

China PMI

China Manufacturing PMI came at 49.4 vs. 49.9 consensus.  A number less than 50 is considered recessionary.

Momo Crowd And Smart Money In Stocks

The momo crowd is selling stocks. Smart money is inactive.

Gold

The momo crowd is aggressively buying gold.  Smart money is inactive.

Oil

Oil has been hit hard on bearish inventory data.  Smart money is lightly buying oil.  The momo crowd is aggressively selling oil.

Marijuana

FDA is holding a meeting with the industry on CBD.  This has the potential to bring both positive and negative news for marijuana stocks.  On the negative side, FDA may ask for more scientific data from the companies but the companies do not yet have the data.  On the positive side, companies may indicate new commitments to CBD.

There is not material momo crowd or smart money activity in marijuana.

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.

Interest rates are ticking down and bonds are ticking up.

The dollar is weaker.

Gold futures are at $1301, silver futures are at $14.50, and oil futures are $55.36.

S&P 500 resistance levels are 2765, 2800 and 2840; support levels are 2740, 2700 and 2688.

DJIA futures are down 243  points.

ON STRONG ECONOMIC DATA MONEY STOPS FLOWING INTO BONDS AND GOLD OUT OF STOCKS

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

Strong Economic Data

Q1 GDP – Second Estimate came at 3.1% vs. 3.0% consensus. This is a strong number.  The stock market, economists and politicians put a lot of weight on this data.  However investors ought to remember that this is a lagging indicator.  If you are interested in beating the market, you should focus on leading indicators.

An example of a leading indicator is Initial Jobless Claims.  Initial Jobless Claims came at 215K vs. 217K consensus.  This is a strong number.

Flight From Stocks Into Gold And Bonds Stops

In yesterday’s Morning Capsule, we shared with you that money was flowing out of stocks into bonds and gold.  The pattern continued through most of the day.

This morning in the early trade, money has stopped flowing out of stocks and into bonds and gold.  As of this writing we are not seeing money beginning to flow out of gold and bonds into stocks.

Money flows over the rest of today and tomorrow between these three asset classes will be very instructive regarding the future of the stock market.

Momo Crowd And Smart Money In Stocks

There is no material momo crowd or smart money activity in stocks this morning.

Gold

There is no material momo crowd or smart money activity in gold this morning.

Oil

API data showed a draw of 5.3 million barrels vs. consensus of 857K barrel draw.  Oil prices have moved up on the data.

Yesterday in the Morning Capsule we shared with you:

The momo crowd is aggressively selling oil. Smart money is lightly buying oil.

Once again investors ought to note that near the lows, smart money was buying but momo crowd was aggressively selling.

This morning as oil has moved up, the momo crowd is aggressively buying but smart money is inactive.

Marijuana

There is no discernable momo crowd or smart money activity in marijuana.

Technical Patterns

Tech – software stocks are tracing a diamond top. This is bearish.  ETF of interest is IGV.

Home construction stocks are tracing a triple top.  This is bearish.  ETF of interest is ITB.

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 can easily swing either way.

Bonds are ticking down and interest rates are ticking up.

Currencies are range bound.

Gold futures are at $1286, silver futures are at $14.45, and oil futures are $59.01.

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

DJIA futures are up 46 points.

PROSPECTS OF RATE CUTS MAY SUPPORT STOCKS, MONEY MOVING INTO BONDS AND GOLD BUT OUT OF SOUTH AFRICA

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

Prospects Of Rate Cuts

The probability of one or two interest rate cuts is rising. This should put a floor under stocks. However no rate cuts are likely in the very near term.  The stock market is moving based on the trade related news.

Trade Worries

The stock market is still under pressure from Trump’s comment that he is ‘not ready yet’ to strike a deal with China.

Rare Earth’s Threat

China has cornered the market for rare earth minerals.  Rare earth minerals are used extensively in the present day electronics. There are more indications that China may use the rare earths as weapons in the trade war. China supplies about 80% of the U. S.’s  rare earth imports.

Money Flows Into Bonds

Money is flowing into bonds.  This is leading to an inverted yield curve.  In the past, an inverted yield curve has been a predictor of a recession.  However, due to unconventional central bank policies,  it is not advisable to rely on the past data that occurred when central banks were not following policies similar to their present day policies.

South Africa

Money is moving out of South Africa on concerns of the composition of the Cabinet.  South Africa’s currency rand broke down from the long trading range dropping as much as 1.1% before recovering.

Momo Crowd And Smart Money In Stocks

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

Gold

Money is flowing into gold  because of perceived safety of gold.

The momo crowd is buying gold.  Smart money is inactive.  The reason smart money is not buying gold is the dollar.  The dollar is rising on trade war concerns. Gold is priced in dollars. The rising dollar is not good for gold.

In our analysis, if the dollar starts falling gold may become a buy for the medium term.

Oil

Oil continues to fall on higher supply from U. S. shale producers.  Inventory data has been delayed due to the holiday.  Inventory data will determine the direction of oil.  Oil is oversold. Oversold markets tend to bounce.

The momo crowd is aggressively selling oil. Smart money is lightly buying oil.

Marijuana

There is no discernable smart money or momo crowd activity in marijuana stocks.

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.

Interest rates are ticking down and bonds are ticking up.

The dollar is slightly stronger.

Gold futures are at $1283, silver futures are at $14.35, and oil futures are $57.22.

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

DJIA futures are down 194 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 24% – 34% and short to medium-term hedges of  10% – 20% and short term hedges of 10% – 20%.

 

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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