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.
SHORT SIGHTED SELLOFF ON TRADE WAR COST IN CHINA — GOOD IN THE LONG TERM
To gain an edge, this is what you need to know today.
Trade War Cost In China
China’s Retail Sales came at 8.1% vs. 8.8% consensus.
China’s Industrial Production came at 5.4% vs. 5.9% consensus.
These are very robust numbers. Compare this to the U. S. retail sales in the section below. None the less, the market has become concerned on the forgoing data and concluding that the trade war is costing China.
It is no secret from you that the trade war is costing China, we have been sharing this with you for awhile. The market previously ignored it but is reacting to it today by selling.
Retail Sales
In the U. S., Retail Sales ex-auto came at 0.2% vs. 0.3% consensus. We exclude autos in our models because auto data is very noisy and hinders good predictions.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively selling stocks in the early trade. Smart money is inactive.
Gold
Gold is weaker due to the stronger dollar. The momo crowd was previously buying aggressively. In the early trade, stops of the momo crowd are getting hit putting extra downward pressure on gold.
You may recall that smart money was selling gold around $1250 which has now turned out to be the top of this swing, at least temporarily.
Oil
Oil is seeing some selling pressure due to concerns about growth in China.
Marijuana
Before the legalization of hemp news, we wrote,
Pay Attention To The History
Pay attention to the history of marijuana stocks. These stocks tend to run up going into the news and after the news they often take a down turn. History does not always repeat itself but it is important to pay attention to it.
That call given in advance has proven spot on. Marijuana stocks have once again experienced ‘sell the news’ reaction.
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 swing positive based on rumors related to trade.
Interest rates are ticking down and bonds are ticking up.
Gold futures are at $1238, silver futures are at $14.61, and oil futures are $52.51.
S&P 500 resistance levels are 2631, 2658 and 2661; support levels are 2615, 2594 and 2550.
DJIA futures are down 196 points.
A SETUP FOR A SHORT SQUEEZE, ECB STOPS PRINTING PRESSES
To gain an edge, this is what you need to know today.
Setup For A Short Squeeze
The number of short sellers and the shares sold short have increased dramatically in certain popular ETFs and certain popular stocks. Obviously the short sellers are pushing the peddle believing that the market is about to go down a lot. Short sellers typically do more research and are smarter. However, historically when the market reaches these kinds of conditions, a short squeeze to the upside is common place. A short squeeze occurs because short sellers panic and start buying to cover. This artificial buying pushes the market higher. Those with less knowledge think that the down draft is over and jump on board pushing the market even higher. Seeing the momentum to the upside, the momo crowd starts buying aggressively.
The foregoing scenario has occurred countless times over the years. We are not saying that this will definitely happen because right now there is no trigger for this to happen. Think of it like an increasing amount of dry tinder, all it takes is one spark to ignite it. At this time we do not know from where the spark will come or even if the spark will come. It is important for investors to be aware of the setup.
ECB Stops Printing Presses
The European Central Bank (ECB) has confirmed that it will phase out its giant bond buying program next month. Going forward this will reduce liquidity in the markets.
We anticipated this awhile ago and this was one of the many reasons behind us telling you in advance that the character of this market is changing. To help investors, we are in the process of updating the Bullet Proof seminar so that investors can be successful in what is to come.
Jobless Claims
Initial Jobless Claims came at 206K vs. 228K consensus.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively buying stocks in the early trade. The smart money is inactive.
Gold
Trading in gold is listless. There are episodes of momo crowd buying and episodes of smart money lightly selling.
Oil
Oil is under pressure. Yemen is planning to resume oil exports.
Marijuana
There is strength in NBEV. It started from legalization of hemp. The last part of the strength is stemming from investors (who are not subscribers to The Arora Report) becoming aware of The Arora Report call to buy NBEV. Such investors are missing the point that the call was made a few days ago at lower prices and now NBEV is hitting our first target zone; our call now is to take partial profits into the strength.
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 neutral but expect the market to open higher.
Interest rates are ticking down and bonds are ticking up.
Gold futures are at $1247, silver futures are at $14.83, and oil futures are $50.81.
S&P 500 resistance levels are 2688, 2700 and 2740; support levels are 2658, 2631 and 2615.
DJIA futures are up 46 points.
MARKET LIKELY TO JUMP ON A RUMOR THAT CHINA COULD GIVE UP ITS WORLD DOMINATION POLICY, HEMP LEGALIZATION
To gain an edge, this is what you need to know today.
China Could Give Up World Domination
China has been working on a world domination plan called Made in China 2025. Trump has been the only world leader who has had the guts to speak out against China’s plan.
There is a rumor this morning that China is looking to replace Made in China 2025 with a plan that the U. S. may find less threatening. The market is likely to jump on this rumor.
Suspect Rally
Yesterday we shared with you that the rally was suspect as it originated from a technical pattern touted on TV and not from natural buying or macro reasons. Our short term indicator was neutral. The market ran up over 300 DJIA points and then turned negative.
Inflation
Core CPI came at 0.2% vs. 0.2% consensus. This indicates that companies are still not passing on the inflation they are experiencing to the consumers. If this trend continues, this may hurt profit growth.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively buying stocks this morning. Smart money is selectively and lightly buying some stocks.
Gold
Trading in gold is listless as it hoovers around the key level of $1250.
Oil
See Technical Pattern section for natural gas.
Oil is seeing buying along with stocks.
API reported an inventory draw of 1.18 million barrels vs. consensus of a draw of 3 million barrels. This is a very bullish number for oil.
EIA data on oil inventories will be released at 10:30 am ET.
Marijuana
The farm bill that Congress is likely to pass this week legalizes industrial hemp. This is causing excitement among CBD related stocks. We will do separate posts on opportunities.
Please also see Technical Patterns for a bullish marijuana pattern.
Technical Patterns
Several marijuana stocks are tracing a wedge. This is bullish. The ETF of interest is MJ.
Natural gas is tracing a top triangle. This is bearish. The ETFs of interest are UNG and DGAZ — bearish for UNG and bullish for DGAZ.
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.
Interest rates are ticking up and bonds are ticking down.
Gold futures are at $1250, silver futures are at $14.76, and oil futures are $52.69.
S&P 500 resistance levels are 2688, 2700 and 2740; support levels are 2658, 2631 and 2615.
DJIA futures are up 218 points.
THE REAL REASON BEHIND THE MARKET FLIP IS APPLE KEY REVERSAL, HOTTER INFLATION
To gain an edge, this is what you need to know today.
The Real Reason Behind The Market Flip
In yesterday’s Morning Capsule, we shared with you the Apple news that we predicted would affect the market. That call has proven spot on.
The market was down 500 DJIA points. Then it flipped positive. Serious investors ought to know and understand the reason behind the flip. Let’s explore with the help of three charts.
Three Charts
Please click here for the annotated day chart of Apple (AAPL) stock.
Please click here for Apple intraday chart.
Please click here for annotated chart of Nasdaq 100 ETF (QQQ). Similar conclusions can be drawn from charts of Dow Jones Industrial Average (DJIA), S&P 500 ETF (SPY) and small cap ETF (IWM).
Please note the following:
- Apple carries very heavy weight in indexes and therefore disproportionately affects the markets.
- Apple stock was down on the news that a Chinese court had granted injunction against Apple selling its products in China in favor of Qualcomm (QCOM).
- Apple uses Qualcomm technology. There is a dispute between the two companies and Apple has been withholding royalties.
- Apple claims that injunction is against products using iOS 11. The current operating system is iOS 12.
- Apple continues to sell its products in China.
- Qualcomm claims that the relevant features are in iOS 12 and selling Apple products is a violation of the injunction.
- Apple stock was down on the news. As Apple stock started bouncing off the lows shown on the intraday chart, there was a discussion on the TV about a doji forming. A doji is a technical pattern in which open and close are virtually equal.
- As positive commentary on the technicals of Apple stock continued on the TV, Apple stock took off.
- Along with Apple stock, Nasdaq 100 ETF QQQ took off.
- As QQQ took off, popular tech stock stocks such as Amazon (AMZN), Facebook (FB), Netflix (NFLX) and AMD (AMD) started moving higher.
- The end result is that Apple and the stock market stage a key reversal which is a positive technical pattern.
Be Suspect
Investors ought to be somewhat suspect because the rally was not triggered by natural buying that often comes in at lows or by a fundamental or a macro event, but by the mention of a doji on TV. This is a reason to be suspect. Investors should not make decisions only on technicals.
Technical analysis is only one of the six screens of the ZYX Change Method that I use and has proven track record.
Hotter Inflation
Core PPI came at 0.3% vs. 0.1% consensus. This is not good news and favors the Fed raising interest rates.
Momo Crowd And Smart Money In Stocks
The momo crowd is aggressively buying stocks. The smart money is inactive.
Gold
Smart money flows in gold are negative. Momo crowd money flows in gold are very positive.
Oil
Oil is moving up along with the stock market.
Marijuana
ACB did not produce large gains on Mexican acquisition. This has created a disappointment. Sometimes there is a delayed reaction. We will have to watch to see if a positive delayed reaction occurs.
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 neutral but expect the market to open higher and expect the momo to attempt to push it much higher.
Interest rates are ticking up and bonds are ticking down.
Gold futures are at $1252, silver futures are at $14.79, and oil futures are $51.76.
S&P 500 resistance levels are 2688, 2700 and 2740 support levels are 2661, 2658 and 2631.
DJIA futures are up 316 points.
ADVERSE RULING AGAINST APPLE HAS THE POTENTIAL TO KILL THE BUDDING RALLY IN STOCKS
To gain an edge, this is what you need to know today.
A Budding Rally
Last night and early morning futures were down on bearish economic data from China and Japan. However as the morning progressed, the momo crowd started aggressively buying. Even smart money started lightly buying. All signs were pointing to a budding rally.
Apple Bad News
The bad news on Apple (AAPL) has the potential to kill the budding rally in stocks. Normally in the Morning Capsule we focus on the macro and not on individual companies. However Apple carries such a heavy weight in major indexes that it can have a great impact.
The news is that a Chinese court has granted Qualcomm (QCOM) two preliminary injections against Apple. At this time there are two contrasting interpretations. One interpretation is that Apple can no longer sell its phones in China. The other interpretation is that these court orders apply to iOS 11. The current operating system is iOS 12 and as a result there should be no impact on Apple.
As the day progresses, more information will become available and that will have major impact on the market.
Momo Crowd And Smart Money In Stocks
As of this writing the momo crowd money has turned extremely negative but they were extremely positive just before the Apple news hit. The smart money flows are neutral.
Gold
Money continues to flow into gold out of stocks.
Oil
Oil is seeing some selling on lower demand concerns.
Marijuana
Aurora Cannabis (ACB) is buying Mexico’s first and only federally licensed importer of products containing THC. This may generate positive sentiment in cannabis stocks.
Technical Patterns
Junior gold miners are tracing a diamond bottom. This is bullish. ETF of interest is GDXJ. Please keep in mind that if stocks rally and money starts flowing out of gold, this pattern will not work.
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 but it can swing either way.
Interest rates are ticking up and bonds are ticking down.
The dollar is slightly stronger.
Gold futures are at $1249, silver futures are at $14.61, and oil futures are $51.66.
S&P 500 resistance levels are 2658, 2661 and 2688; support levels are 2631, 2615 and 2594.
DJIA futures are down 5 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 21% – 31% and short to medium-term hedges of 10% – 15% and short term hedges of zero.
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