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.
BOJ ACTS PRUDENTLY BY NOT BOWING TO THE MARKETS, SHOCKING ECONOMIC DATA POINT IN THE U. S., AND OIL ENTERS A BEAR MARKET AGAIN
This is what you need to know today.
Japan
Bank of Japan (BOJ), chose to not bow to the markets and act prudently. BOJ will increase purchase of ETFs so that their outstanding amount will rise at an annual rate of 6 trillion yen, the consensus was 20 trillion yen.
Most important is what BOJ did not do.
- It did not start helicopter money.
- It did not push further into negative interest rates.
Currencies
Yen is stronger as BOJ did not bow to the markets. Euro is going along higher with yen for a ride.
Shocking U. S. Economic Data
Q2 GDP – Advanced came at 1.2% vs. 2.6% consensus. This is a shockingly weak number. However we question the validity of this number, it is simply an advanced estimate and is likely to be wrong as the other economic data does not corroborate.
Precious Metals
We are switching over to December gold contract because it provides the most liquidity.
Gold screamed higher on BOJ announcement as dollar weakened. However, bulls realized that there is no helicopter money and there is no incursion deeper into negative interest rates. As a result gold sold off. Then came the shocking U. S. GDP number. Gold is breaking out of the resistance at $1350 on this number. However it is worth repeating that this GDP number is simply an advanced estimate and is likely to be revised.
Oil
Oil entered a bear market again. Most of the morning it has traded with a handle of $40.
Markets
Our very, very short-term early stock market indicator is negative.
Interest rates are falling and bonds are going higher on weak GDP.
Gold futures are at $1353, silver futures are at $20.33, and oil futures are $40.97.
S&P 500 resistance levels are 2165, 2200 and 2222; support levels are 2150, 2132, and 2120.
DJIA futures are down 48 points.
FED SAYS NEAR TERM RISKS DEMINISH
This is what you need to know today.
Fed
The Fed says near term risks to the economy have diminished. The Fed left the door open for a rate increase as early as September if economic data supports it.
Not Believable
Immediately after the Fed statement, precious metals, currencies, and bonds fell. This reaction made sense. If the risks are diminishing and rates are going to rise, there would be less reason to buy gold. Then a large institution started a short squeeze in gold. As gold moved up, it encouraged the “we don’t believe you,” crowd. Proclamations that the Fed has no credibility started flowing from the gurus. The result was a massive short squeeze in gold, silver, euro and yen.
Critical Night Ahead
There is a critical night ahead as the world awaits Bank of Japan action.
Markets
Our very, very short-term early stock market indicator is neutral but can quickly change.
Oil is trading under $42.
Gold and currencies are levitating after a massive short squeeze yesterday.
Interest rates and bonds are range bound.
Gold futures are at $1343, silver futures are at $20.44, and oil futures are $41.93.
S&P 500 resistance levels are 2165, 2200 and 2222; support levels are 2150, 2132, and 2120.
DJIA futures are down 19 points.
THE FED DAY BUT THE REAL ACTION IS IN JAPAN
This is what you need to know today.
Fed Day
At 2:00 pm ET FOMC rate decision will be announced. FOMC is not likely to increase rates. Everyone will be reading the tea leaves from the statement to figure out the timing of the next rate increase. Consensus is that there will be no rate increase until 2018.
In our analysis, Fed will keep the possibility of a rate increase this year open.
Real Action
The real action is in Japan where BOJ will announce its decision on Friday. Prime Minister Abe has now helped us out by indicating what is likely to happen. There will be coordination between fiscal and monetary policies. BOJ alone will not shoulder the entire burden. Combined stimulus package will be about 28 trillion yen or about $265 billion.
Details of the fiscal side will be announced next week.
In spite of this clarity, there is no telling what trigger happy investors will do on Friday after Bank of Japan’s announcement.
Our plan will be to be patient and wait for the fiscal package details next week. However, if traders drastically over react or underreact to BOJ statement on Friday, we will take the opposite side.
What happens in Japan here will significantly impact all markets across the world including precious metals and the U. S. stock market.
Durable Goods Orders
Durable Goods Orders Ex-Transport came at -0.5% vs. +0.2% consensus. This is a negative data point among the recent string of positive data points. However it is important to note that Durable Goods Orders is a very volatile series and not much reliance to be placed on one month’s number.
Oil
API Data showed that U. S. crude inventories fell by 800 K barrels vs. consensus of a decline of 2.6 million barrels.
EIA Data, which is considered more authoritative, will be released at 10:30 am ET.
A bigger problem for the oil is not crude inventories but gasoline inventories. Gasoline inventories are building up at a time when we are about to enter the shoulder season in which gasoline demand falls.
Markets
Our very, very short-term early stock market indicator is positive but can quickly reverse, The only reason the indicator is positive is because AAPL is likely to open much higher and AAPL has significant weight in indices.
Gold, silver, and bonds are going higher on weak durable orders.
Yen is lower on potential stimulus in Japan.
Oil is staying under $43 awaiting data.
Gold futures are at $1322, silver futures are at $19.74, and oil futures are $42.80.
S&P 500 resistance levels are 2200, 2222 and 2250; support levels are 2150, 2132, and 2120.
DJIA futures are up 49 points.
APPREHENSION AHEAD OF BOJ MEETING, HELICOPTER MONEY MAY BE ILLEGAL IN JAPAN, OIL FALLS
This is what you need to know today.
Apprehension
There is significant apprehension in all markets across the globe including the U. S. stock market ahead of the Bank of Japan meeting. The only exception is gold and silver. The word is spreading that helicopter money may be illegal in Japan. A part of the current rally emanated from Bernanke’s visit to Japan advocating helicopter money.
Yen is screaming higher.
It is worth repeating that BOJ is likely to have more effect than the Fed on all markets including the U. S. stock market.
Gold And Silver
With the prospect of helicopter money diminishing, gold and silver should be falling. Instead momo crowd is aggressively buying gold and silver. Momo crowd is not known for deep research, they usually buy on simple technicals or they do what ever their gurus tell them.
Oil
Oil fell as low as $42.38 but bounced when the pit opened. The market is anxiously awaiting API data that will be released at 4:30 pm ET.
Markets
Our very, very short-term early stock market indicator is neutral.
Interest rates and bonds are range bound.
Gold futures are at $1320, silver futures are at $19.62, and oil futures are $42.42.
S&P 500 resistance levels are 2165, 2200 and 2222; support levels are 2150, 2132, and 2120.
DJIA futures are down 12 points.
FOMC AND BOJ AHEAD, POSITIVE SENTIMENT FROM GERMANY AND OIL BREAKS
This is what you need to know today.
Fed
The Fed will announce its rate decision on the 27th after FOMC meeting. Consensus is no rate increase. However, the wording of the policy statement may move the markets.
Bank Of Japan
BOJ will announce its decision on July 29th. Consensus is for additional stimulus of about 20 trillion yen.
BOJ decision is likely to have more impact on markets than the Fed.
Positive Sentiment
There is positive sentiment around stocks emanating from Germany where Ifo Business Climate Index came at 108.3 vs. 107.5 consensus. European stocks are now trading higher than pre-Brexit vote.
Oil
We were sharing with you that Smart Money was consistently selling oil around $50 and continued to sell oil as it fell but momo crowd continued to buy it aggressively. As is usually the case, now momo crowd is sitting on big losses and is selling in panic. This has now driven oil below $44.
Gold And Silver
Gold has given up its gains from Friday. Friday saw extremely aggressive buying by the momo crowd only to be met with selling by Smart Money on up-spikes. Momo continues to aggressively buy gold as it dips to $1513 and silver around $19.50.
Markets
Our very, very short-term early stock market indicator is neutral.
Currencies, interest rates and bonds are range bound.
Gold futures are at $1316, silver futures are at $19.52, and oil futures are $43.52.
S&P 500 resistance levels are 2200, 2222, and 2250; support levels are 2132, 2120, and 2100.
DJIA futures are down 4 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%.
You are receiving less than 2% of the content from our paid services …TO RECEIVE REMAINING 98%, 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.
