WEEKLY MARKET DIGEST: SERIOUS RISKS TO STOCKS BUT BULLS UNDETERED PUTTING FAITH IN THE FED, GOLD BUYING $DIA $GLD $QQQ $SLV $SPY $TBT $USO

WEEKLY MARKET DIGEST: SERIOUS RISKS TO STOCKS BUT BULLS UNDETERED PUTTING FAITH IN THE FED, GOLD BUYING $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.

MODERATE RETAIL SALES AND INDUSTRIAL PRODUCTION

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

Retail Sales

Retail Sales Ex-auto came at 0.3% vs. 0.3% consensus.  We leave auto out because auto data is noisy and hinders projections.

Industrial Production

Industrial Production came at -0.3% vs. -0.3% consensus.

Capacity utilization came at 76.8% vs. 76.8% consensus.

Momo Crowd And Smart Money In Stocks

The momo crowd is buying stocks in the early trade.  Smart money is lightly selling into the strength.

Gold

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

For longer term, please see gold and silver ratings.

Oil

The momo crowd is buying oil.  Smart money is inactive.

For longer term, please see oil ratings.

Marijuana

CGC reported better than expected earnings.  This is creating optimism.

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 negative but can quickly swing positive.  This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.

Interest rates are ticking down and bonds are ticking up.

The dollar is weaker.

Gold futures are at $1583, silver futures are at $17.74, and oil futures are $51.91.

S&P 500 resistance level is 3400; support levels are 3360, 3300 and 3288.

DJIA futures are down 10 points.

MISLEADING HEADLINE ON CORONAVIRUS GIVING PAUSE TO THE MOMO CROWD, FED INJECTS MORE LIQUIDITY

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

Misleading Headline

The headline is misleading.  Recently China had changed the method used to count coronavirus victims.  That method was undercounting.  Now China has changed the method again.  This is a one-time adjustment.

At The Arora Report, in our model, we have always been assuming significantly higher number of coronavirus cases compared to the official numbers.  We have previously written that the Chinese government has an incentive to under report the number.  The news does not affect our analysis.

Fed Injects Liquidity

The Fed continues to inject liquidity in the market.  The Fed reported this morning the fourth oversubscribed term-repo operation.

This is the liquidity that is driving the stock market up.

Consumer Price Index

Core CPI came at 0.2% vs. 0.2% consensus.

Initial Claims

Initial Jobless Claims came at 205K vs. 212K consensus.

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 on the coronavirus news.  Smart money is inactive.

For longer term, please see gold and silver ratings.

Oil

EIA data was bearish for oil but the momo crowd is buying oil.  Smart money is inactive.

For longer term, please see oil ratings.

Marijuana

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

ACB reported poor earnings causing further  negative sentiment.

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.  This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.

Interest rates are ticking down and bonds are ticking up.

The dollar is stronger.

Gold futures are at $1578, silver futures are at $17.68, and oil futures are $51.13.

S&P 500 resistance levels are  3366 and 3400; support levels are 3300, 3288 and 3256.

DJIA futures are down 134 points.

NOTHING STOPS STOCK MARKET GENERALS FROM MARCHING AHEAD BUT TROOPS NOT FOLLOWING

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

Bad News Is Good News

The momo (momentum) crowd in the stock market has it all figured out. ‘Good news’ is ‘great news’. ‘Bad news’ is ‘good news’. There is nothing that cannot be twisted into a reason to buy.

Is Bernie Sanders win a good thing for the stock market? Wall Street says ‘Yes’, because this makes Trump stronger. Is coronavirus a good thing? Wall Street says ‘Yes’, because central banks will print more money. Why not buy on the news of coronavirus and then buy again on the news of coronavirus spread slowing? Why not buy on bad economic data; as it will simply make central banks inject more liquidity.

In the middle of all this so called ‘good news’, investors ought to note that generals are rushing to the front line but the troops are not following. Does anyone see anything wrong with this strategy? Let’s explore with the help of a chart.

The Chart

Please click here for a chart that compares three ETFs and four stocks.

Note the following:

  • Dow Jones Industrial Average (DJIA) is a price weighted index. Dow Jones Industrial Average ETF (DIA) is performing in line with equal weighted S&P 500 ETF (RSP).
  • S&P 500 (SPX) is a cap weighted index. Mega-cap tech stocks such as Facebook (FB), Amazon (AMZN), Google (GOOG) (GOOGL) and Apple (AAPL) carry a heavy weight in this index.
  • The chart shows that S&P 500 ETF (SPY) is significantly outperforming the equal weighted S&P 500 ETF.
  • Microsoft (MSFT) has left even Apple in the dust producing more than twice the return of Apple.
  • After lagging last year, Amazon stock has taken off like a rocket and is now only second to Microsoft in performance.
  • Google reported less than expected earnings. What did Google stock do? The dip was aggressively bought and now Google is outperforming Apple.
  • Apple derives significant sales from China. Its stores have been shut down in China. Should this concern investors? No, because Chinese love iPhones and will buy when the stores open – no reason not to be bullish on Apple stock.
  • Apple’s supply chain is centered in China. Apple’s supply chain is clearly getting disrupted. Is this a reason to not be bullish on Apple? No, scarcity of Apple products will simply make Apple fans want them more – so goes the story.

What Does It All Mean?

Stay cautiously bullish but use appropriate defensive measures such as cash and hedges – we provide precise levels that are appropriate now. In the very short term, the market is getting overbought and sentiment is becoming overly positive – the conditions are ripe for a pullback.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying stocks.  Smart money is selling into the strength.

Gold

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

For longer term, please see gold and silver ratings.

Oil

The momo crowd is buying oil even though API data was bearish.  Smart money is inactive.

For longer term, please see oil ratings.

Marijuana

There is no discernable 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 positive but can quickly swing negative.  This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.

Interest rates are ticking up and bonds are ticking down.

The dollar is stronger.

Gold futures are at $1569, silver futures are at $17.47, and oil futures are $51.53.

S&P 500 resistance level is 3400; support levels are 3360, 3300 and 3288.

DJIA futures are up 167 points.

POWELL TESTIMONY, SOMETHING RARER IS HAPPENING IN TECH STOCKS DRIVING THE MARKET HIGHER

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

Powell Testimony

Powell is about to start testifying in front of the Congress.  He will say that the Fed is keeping a close eye on coronavirus. He is not likely to announce any policy changes.

Something Rarer Is Happening

Popular technology stocks are leading the stock market higher. The stock market is going higher in spite of the bad news. Should investors look under the surface?

Segmented money flows are like an X-ray of stocks. Just like a doctor uses an X-ray to see what is going on below the surface, prudent investors can do the same with stocks.

A month ago I wrote, ‘The single most important observation from the chart is that, of the 33 money-flow-related data points, not a single one is neutral or negative. This happens only once in a blue moon.’

The last occurrence of all 33 data points being positive was a rare occurrence. Now the data points have become even more positive after a month of strong up moves. This is even a rarer occurrence.

We will shortly do a new post under money flows in ZYX Buy and ZYX Short and also republish in other feeds.

Momo Crowd And Smart Money In Stocks

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

Gold

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

For longer term, please see gold and silver ratings.

Oil

The momo crowd is buying oil.  Smart money is inactive.

For longer term, please see oil ratings.

Marijuana

There is no discernable momo crowd or smart money 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 positive but can quickly swing negative.  This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.

Interest rates ticking up and bonds are ticking down.

The dollar is stronger

Gold futures are at $1575, silver futures are at $17.67, and oil futures are $50.62.

S&P 500 resistance level is  3400; support levels are 3300, 3288 and 3256.

DJIA futures are up 120 points.

’IN CENTRAL BANKS WE TRUST’ — STOCK MARKET PUTS LIPSTICK ON CORONAVIRUS

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

China Factory Openings

China is the factory to the world. There are conflicting reports about factory openings in the aftermath of coronavirus. It has always been the job of the governments and the companies to put lipstick on the pig. Why not put some lipstick on coronavirus impact and say this too shall pass?

In our analysis, the impact of coronavirus on China GDP for the first quarter will be at the rate of about 1.5%. China is still the growth engine of the world. It will drag down world growth. Should investors care? Price action in the stock market shows that most investors do not care. Paradoxically such investors may be right.

The current motto of investors is: ‘In central banks we trust’. Central banks have shown that they stand ready to put lipstick on everything to drive stock markets higher across the world. What can possibly go wrong? So far it has been a free lunch. Let’s examine with the help of a chart.

The Chart

Please click here for an annotated chart of Dow Jones Industrial Average (DJIA) ETF (DIA).

Note the following:

  • Foxconn, the main Apple (AAPL) supplier, has received approval to resume production at an important plant in China. There is a report that only 10% of the workforce has managed to return. Investors seem to ignore the workforce return issue and are focusing on the plant opening.
  • Tesla (TSLA) has announced that Shanghai will help open its China factory.
  • The chart shows a short squeeze that led to the recent high.
  • Wall Street positioning is such that another short squeeze can easily occur over the next two weeks. A short squeeze causes artificial buying resulting in violet up moves.
  • The chart shows the strong trendline that was in place since October.
  • The chart shows the break of the trendline on coronavirus fears.
  • The chart shows liquidity injection.
  • The chart shows a strong rally after the liquidity injection.
  • RSI shows negative divergence. In plain English, it means that even though the stock market has not fallen, the internal momentum is sending a negative signal.
  • The chart shows that during the rebound in the stock market, volume has been relatively higher. This indicates that the fear of missing out (FOMO) is stronger than the fear of losing money.
  • Semiconductor stocks have been the leading indicators. Consider keeping a close eye on price action in Intel (INTC), Micron (MU), AMD (AMD) and NVIDIA (NVDA).
  • Also keep a close eye on mega-caps of Microsoft (MSFT), Amazon (AMZN), Facebook (FB) and Google (GOOG) (GOOGL).

What Does It All Mean?

Markets are complex. Many factors other than coronavirus are at play. Investors ought to take a comprehensive look using a comprehensive proven model such as ZYX Asset Allocation Model with inputs in 10 categories.

Momo Crowd And Smart Money In Stocks

The momo crowd is acting like a yo-yo in the early trade. Smart money is inactive.

Gold

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

For longer term, please see gold and silver ratings.

Oil

Russia is apparently refusing to cut oil production. This is bearish.

The momo crowd is selling oil.  Smart money is inactive

For longer term, please see oil ratings.

Marijuana

There is no discernable smart money or momo crowd activity in the early trade.

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 positive if a short squeeze starts.  This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.

Interest rates are ticking down and bonds are ticking up.

The dollar is stronger.

Gold futures are at $1578, silver futures are at $17.78, and oil futures are $49.86.

S&P 500 resistance levels are  3360 and 3400; support levels are 3300, 3288 and 3256.

DJIA futures are down 93 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% – 32% and short to medium-term hedges of  0% – 15% and short term hedges of 5% – 10%.

 

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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