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.
SHOCKER JOBS HEADLINE NUMBER BUT ALSO A SHOCK BELOW THE COVERS, GOLD AND BONDS SOLD
To gain an edge, this is what you need to know today.
Headline Shocker
September Non-farm Private Payrolls came at -40K vs. +98K consensus. Typical monthly numbers this year have been around 200K. Lower numbers were expected due to the hurricanes but nobody expected a negative number. This number is a shocker.
In our analysis, investors should ignore this weak number but focus on another shocker inside the report.
The Shocker Inside The Report
There is a huge shocker inside the employment report. September hourly earnings rose by 0.5% vs. 0.2% consensus. This indicates that the labor market is tightening much faster than the policy makers are thinking. If future hourly earnings increases continue to come at this rate, there is a strong potential for the following two scenarios that the stock market does not believe in at this time.
- Much higher inflation than anticipated.
- Much higher interest rates than anticipated.
We will be keeping a close eye on the labor market because it may turn out that this data has the most impact on investors.
Stocks
The ‘smart money’ is lightly selling stocks.
The momo crowd continues to buy stocks.
Gold
The smart money is lightly selling gold.
The momo crowd is inactive.
Bonds
The smart money is selling bonds
The momo crowd is inactive.
Oil
The smart money is aggressively selling oil.
The momo crowd is also selling oil.
Oil has fallen below the $50 support.
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.
The dollar is getting stronger.
Gold futures are at $1267, silver futures are at $16.59, and oil futures are $49.45.
S&P 500 resistance levels are 2550 and 2615; support levels are 2500, 2450, and 2425.
DJIA futures are down 45 points.
LISTLESS TRADE AHEAD OF TOMORROW’S REPORT, BUYING IN HIGH BETA TECH STOCKS, SPAIN BOUNCES, FED SPEAK
To gain an edge, this is what you need to know today.
Listless Trade
Trading across the globe in stocks, bonds, gold and currencies is listless ahead of tomorrow’s release of the mother of all numbers – the employment report.
There are two exceptions as stated below.
High Beta Tech Stocks
The momo crowd is aggressively buying high beta tech stocks in early trade. This is driven by the news that AMZN is testing its own delivery service in competition with FDX and UPS.
The ‘smart money’ is inactive.
Spain Bounces
The separatist leader of Catalonia made an offer to mediate. The powerful economy minister of Spain rejected the offer. Investors are snapping up Spanish bonds. Spanish stocks are also rising.
The smart money is lightly buying Spanish stocks.
Fed Speak
There are a number of Fed officials speaking. Their speeches have the potential to move the markets.
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.
Gold futures are at $1278, silver futures are at $16.73, and oil futures are $50.16.
S&P 500 resistance levels are 2550 and 2615; support levels are 2500, 2450, and 2425.
DJIA futures are up 6 points.
DOLLAR RETREATS ON WARSH LEADING THE RACE FOR THE NEXT FED CHAIR, ADP DATA, EUROPE PMI
To gain an edge, this is what you need to know today.
Race For The Fed Chair
There are several reports that President Trump has been given a short list of the candidates for the Fed chair. Kevin Warsh appears to be the leading candidate. Warsh has criticized the Fed for trying to do too much with monetary policy. He is more hawkish than Yellen.
The markets are addicted to the loose monetary policies of Yellen. Currency markets often act first while stock market stays oblivious.
Investors should be paying careful attention to this matter as this has the potential to significantly move the markets.
Gold
Gold often moves inverse to the dollar. Gold is moving higher on the retreat in the dollar.
ADP Data
ADP is the largest private payroll provider in the United States. It uses its data to give a glimpse in advance of the mother of all reports that will be released on Friday.
ADP employment change came at 135K vs. 140K consensus.
Europe PMI
Purchasing Managers Index (PMI) for the euro area came at 56.7 vs. 56 consensus. This is a leading indicator and carries a heavy weight in our models. This data shows that the European economy is doing well.
Catalonia Jitters
There is no progress in resolving the Catalonia situation in Spain. This is causing jitters. European stocks are down slightly but Spain is leading the losses.
Oil
Oil prices are under pressure on API reporting that gasoline inventory build of 4.19 million barrels vs. consensus of 1.09 million barrels.
API showed crude oil draw of 4.08 million barrels vs. consensus of a draw of 756K barrels.
More authoritative EIA data will be released today at 10:30 am ET.
Technical Patterns
Several gold miners are tracing a Wedge. This is bullish. ETF of interest is GDX.
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.
Bonds are ticking up and interest rates are ticking down.
Gold futures are at $1279, silver futures are at $16.69, and oil futures are $50.39.
S&P 500 resistance levels are 2550 and 2615; support levels are 2500, 2450 and 2425.
DJIA futures are down 18 points.
DIGESTING THE GAINS, MOTHER OF ALL REPORTS AHEAD
To gain an edge, this is what you need to know today.
Stocks Digesting The Gains
Stocks in Asia followed the U. S. stocks higher. Hong Kong stocks surged. Japanese stocks closed at the highest level in two years.
The new quarter money coming into the stock market is still not fully invested. The buying from this new money will support the stock market today and tomorrow.
Dollar Digesting The Gains
The dollar has had a strong move. Today it is digesting the gains. The dollar is now at an inflection point. It can either start a new leg up or retrace some of the recent gains. It will likely depend on the data to be released on Friday.
Spain
The Euro is edging higher in spite of tensions in Catalonia. Spanish stocks and bonds are losing ground. European stocks are range bound but not losing ground.
Gold
Trading in gold is listless. It has broken under an important support level. The future course of gold will depend on the dollar which in turn will depend on the data to be released on Friday.
Mother Of All Reports
On Friday, at 8:30 am ET, the U. S. Department of Labor will release the employment report for September. This is known as the mother of all reports because it is widely watched and often moves the markets.
This time the data will be convoluted due to hurricanes.
Technical Patterns
Natural gas is tracing a Diamond Top. This is bearish. ETF of interest is UNG. However, our tentative plan is to buy if there is a major down spike.
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.
Oil is range bound with $50 providing support.
Interest rates and bonds are range bound.
Gold futures are at $1273, silver futures are at $16.63, and oil futures are $50.30.
S&P 500 resistance levels are 2550 and 2615; support levels are 2500, 2450 and 2425.
DJIA futures are up 33 points.
MONEY FLOWING INTO STOCKS AND DOLLAR BUT OUT OF GOLD, BONDS AND OIL; TROUBLE IN SPAIN, CHINA PMI, AUSTRALIAN STOCKS
To gain an edge, this is what you need to know today.
Money Flows
Last week we shared with you in advance,
At the beginning of each quarter, significant new money pours into the stock market. This is about to happen again next week supporting the market.
In early trade, smarter players are moving several asset classes jumping ahead of both orders from mutual funds and private investors that may come later in the day.
Stocks
Money is flowing into stocks. Most of the buying appears to be from professional traders, not investors. These traders seem to have a horizon of a few hours as they will likely sell to mutual funds and institutions later today.
From an investment perspective, the ‘smart money’ is inactive.
Dollar
The dollar is getting stronger against all major currencies as Yellen’s hawkishness from last week begins to sink in. This has major implications for stock investors as we approach the 30th anniversary of 1987 crash. We will do a separate post on the subject shortly.
Gold
Gold is priced in dollars. As dollar becomes stronger gold becomes weaker. The smart money is inactive in gold.
Smart Money Sells Bonds
The smart money is selling bonds. Interest rates are creeping up. This has implications for stock investors. Please carefully study the upcoming post on the 1987 crash.
Oil
The short squeeze in oil is over. With upward pressure from the short squeeze gone, money is moving out of oil.
Trouble In Spain
Catalonia region of Spain is the most prosperous. In an illegal referendum, 2.3 million of the votes cast were in favor of secession. Separatist leaders had said that they would move towards unilateral declaration of independence if they received more than 1.8 million votes.
Stocks and bonds in Spain are under pressure. However there is buying in European stocks. Also not much money is flowing out of Spain at this time. We will keep a close eye for you on this situation.
China PMI
The official PMI came at 52.4 vs. 51 consensus.
It is of interest that unofficial Manufacturing PMI by Caixin fell to 51 vs. 51.5 consensus.
PMI is a leading indicator and carries heavy weight in our models.
So far the market is ignoring the weak number and focusing on the strong number.
Australian Stocks
Australia benefits from strong economy in China due to exports of raw materials from Australia to China. China PMI is temporarily moving up Australian shares.
Technical Patterns
Several real estate stocks outside the United States are making an Island Bottom. This is bullish. ETF of interest is RWX.
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.
Gold futures are at $1278, silver futures are at $16.69, and oil futures are $50.44.
S&P 500 resistance levels are 2550 and 2615; support levels are 2500, 2450 and 2425.
DJIA futures are up 29 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% – 29% and short to medium-term hedges of 15% – 25% and very short term hedges of 15%.
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