WEEKLY MARKET DIGEST: RUN ON THE BANK, OIL SPIKES OPEC BUT HURDLES REMAIN, INDIA STRIKES $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO $ASHR $DB $EPI $INDA $FXI

 WEEKLY MARKET DIGEST: RUN ON THE BANK, OIL SPIKES OPEC BUT HURDLES REMAIN, INDIA STRIKES PAKISTAN $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO $DB $EPI $INDA $ASHR $FXI

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.

RUN ON THE BANK, YUAN DAY AND PERSONAL INCOME

This is what you need to know today.

Run On The Bank

The Arora Report was one of the first to bring to paying subscribers attention the Deutsche Bank situation.  Markets caught up yesterday after a report by Bloomberg that 10 hedge funds were reducing their exposure to DB.  At one point, stock market fell 247 DJIA points on the report.

In our analysis, the report is suspect.   Could it be that short sellers planted the story to drive DB stock down?

The probability is fairly high that Department of Justice will  reduce the $14 billion fine and this situation will have no long-term impact on the marketS.  Having said that, run on the bank must not be ignored and deserves careful watch.

According to the action in options, short sellers are hoping to push DB stock down to 8 euros.  Ironically, after steep losses, DB stock has bounced back to close to break even in Frankfurt.

Yuan Day

Tomorrow yuan will join IMF’s Special Drawing Rights Basket of Currencies that includes dollar, euro, yen and pound.

We do not expect any material impact on the markets.

Personal Income

Personal Income came at 0.2% vs. 0.2% consensus.  Personal Spending came at 0.o% v.s 0.2% consensus.

Markets

Our very, very short-term early stock market indicator is neutral.

Dollar is higher.

Momo crowd is aggressively buying gold and silver on DB fears.

Interest rates are ticking lower and bonds are ticking higher.

Gold futures are at $1330, silver futures are at $19.70, and oil futures are $48.07.

S&P 500 resistance levels are 2165, 2200 and 2222; support levels are 2132, 2120, and 2100.

DJIA futures are up 29 points.

EUPHORIA OVER OPEC COULD BE MISPLACED, INDIA STRIKES MILITANTS IN PAKISTAN

This is what you need to know today.

OPEC Understanding

OPEC has reached an understanding to limit production to 32.5 – 33 million barrels per day.  This will be finalized in the November OPEC meeting.  At present, OPEC is producing 33.1 – 33.4 million barrels per day.  The proposed agreement would reduce production by about 600K barrels per day.

Misplaced Euphoria

Euphoria over OPEC understanding may be misplaced for the following reasons.

  • There are many hurdles in the way of negotiating a final agreement.
  • There are no caps on production by Libya, Nigeria, or Iran.
  • OPEC provides only about 40% of the world’s oil.
  • If prices move into $50s, U. S. shale producers will increase production.
  • Demand from India and China remains weak.

As a full disclosure, ZYX Buy had a long position in oil going into the OPEC meeting.  Our call is to take profits on half the position taking advantage of the strength on the news.

Kashmir

Kashmir is partially controlled by India and partially controlled by Pakistan.  Both India and Pakistan have substantial nuclear arsenal.  This is the reason that such events must be carefully tracked.

Overnight India attacked terrorist camps in Pakistan occupied Kashmir. This is precedence setting.  In the past, in spite of several terrorist attacks in India by militants based out of Pakistan, India had refrained from crossing the boarder due to the high risk.

Markets

Our very, very short-term early stock market indicator is neutral.  Expect volatility as the downward force of OPEC euphoria fading meets the upward force of quarter-end window dressing.

Momo crowd is aggressively buying oil keeping it over $47.

Dollar is slightly stronger.

Interest rates and bonds are range bound.

Smart money sold gold yesterday afternoon.  Gold fell below $1320 when momo crowd stepped in with aggressive buying.

Gold futures are at $1324, silver futures are at $19.13, and oil futures are $47.22.

S&P 500 resistance levels are 2200, 2222 and 2250; support levels are 2150, 2132, and 2120.

DJIA futures are down 28 points.

SOFTENING OF POSITIONS IN ALGIERS, DEUTSCHE BANK RISES

This is what you need to know today.

Algiers

There are signs that in Algiers both Saudi Arabia and Iran are softening their stance on oil production.  Oil is rallying.

API and EIA numbers are mostly meaningless this time because the main focus is on OPEC.

Deutsche Bank

Deutsche Bank sold its U. K. insurance subsidiary Abbey Life Assurance for $1.2 billion. This sale is temporarily ending the slump in Deutsche Bank.

This is creating positive sentiment in stocks across the globe.

As a full disclosure, ZYX Buy Change Alert started a position in DB yesterday near the lows.

Markets

Our very, very short-term early stock market indicator is neutral but expect market to start out positive.

Gold and silver continue to slump further on Clinton debate victory.

Currencies, bonds and interest rates are range bound.

Gold futures are at $1327, silver futures are at $19.14, and oil futures are $45.16.

S&P 500 resistance levels are 2165, 2200 and 2222; support levels are 2132, 2120, and 2100.

DJIA futures are up 27 points.

MARKETS DECLARE DEBATE WINNER, POSTURING IN ALGIERS

This is what you need to know today.

Markets Declare Debate Winner

It is important for investors to know that it is not their belief but the collective judgement of the markets that counts.  Here is how the markets reacted as Trump and Clinton debate progressed last night.

  • Mexican peso rose 1.7%
  • DJIA futures rose over 100 points.
  • Gold fell
  • Chinese stocks rose
  • Japanese stocks rose

Based on the foregoing, markets declared Clinton the winner.

Our Analysis

In our analysis, the knee jerk reactions of the markets may not last for the reasons that we have previously written.  There was no knockout punch to Trump.

October 9th

The next debate is on October 9th.  In the absence of a knockout in the first debate, the next debate takes on extra importance for investors.

Individual Trades

We have previously written,

The market is positioned for Clinton to win. Hence there are not many good trades.

Saudi Arabia

Saudi Arabia is cutting salaries and bonuses of civil servants and ministers.  Not long ago this would have been unthinkable.

The insight here is that Saudi’s may end up softening their stance on oil production.

Iran

Iran’s oil minister is stating that Iran wants to increase its production to 4 million barrels a day.  Current production is 3.6 million barrels per day.

Algiers

OPEC is meeting in Algiers.  There is all kinds of posturing going on. The spin from Algiers is making oil volatile.

Markets

Our very, very short-term early stock market indicator is neutral.  As of this writing, Clinton rally has mostly faded.

Oil, gold, silver, interest rates and dollar are lower.

Bonds are higher.

Gold futures are at $1336, silver futures are at $19.41, and oil futures are $44.79.

S&P 500 resistance levels are 2150, 2165 and 2200; support levels are 2132, 2120, and 2100.

DJIA futures are down 29 points.

STOCKS WEAKER ON DEUTSCHE BANK AHEAD OF THE DEBATE AND OPEC

This is what you need to know today.

Deutsche Bank

Deutsche Band (DB) is the largest German bank and one of the largest banks in the world.  A magazine reported that Chancellor Merkel has ruled out help for DB.  The U. S. Department of Justice wants DB to pay $14 billion in fines.

Large banks have a special place in our markets.  When they get into trouble, the entire market suffers.

DB shares are hitting a low and have driven stocks lower across the globe.

Debate

Crucial first presidential debate is tonight. Expect a lot of position squaring.

OPEC

Crucial OPEC meeting is this week. There is  mixture of both bullish and bearish reports about the meeting.

Markets

Our very, very short-term early stock market indicator is negative.

Gold, silver, bond, and oil are attempting a rally.

Currencies are range bound.

Gold futures are at $1345, silver futures are at $19.67, and oil futures are $45.42.

S&P 500 resistance levels are 2165, 2200 and 2222; support levels are 2132, 2120, and 2100.

DJIA futures are down 91 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 27 – 38% of assets in cash or treasury bills, and short to medium-term hedges of  25% and very short term hedges of 5%.

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