WEEKLY MARKET DIGEST: SLOWEST GROWTH IN CHINA IN 29 YEARS, DECEMBER DATA BULLISH, NEW STOCK MARKET HIGH $DIA $GLD $QQQ $SLV $SPY $TBT $USO

WEEKLY MARKET DIGEST: SLOWEST GROWTH IN CHINA IN 29 YEARS, DECEMBER DATA BULLISH, NEW STOCK MARKET HIGH$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.

SLOWEST GROWTH IN CHINA IN 29 YEARS BUT THE DATA FOR DECEMBER IS BULLISH, NEW STOCK MARKET HIGH

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

China

The Chinese economy grew by 6.1% in 2019, roughly in line with consensus.  This is the slowest growth rate in 29 years.

On an optimistic note, the data from December is bullish.  Industrial production came at 6.9% vs. 5.9% consensus.

Retails Sales came at 8.0% vs. 7.8% consensus.

Housing Starts

December Housing Starts came at 1608K vs. 1380K consensus.  This is an extremely strong number. After stagnating last year, house prices are beginning to jump again.

December Building Permits came at 1416K vs. 1420K consensus.

Momo Crowd And Smart Money In Stocks

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

Gold

There is no discernable momo crowd or smart money activity in gold.

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

The momo crowd is aggressively 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 neutral but expect the market to open significantly higher.  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 $1556, silver futures are at $18.09, and oil futures are $58.86.

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

DJIA futures are up 92 points.

STRONG RETAIL SALES; AFTER THE TRADE DEAL, CHINA TO REMOVE THE U. S. SWORD OF DAMOCLES — THIS AMERICAN COMPANY WILL BENEFIT

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

Strong Retail Sales

The U. S. economy is 70% consumer based.  For this reason investors should keep a close eye on retail sales.  Retail Sales Ex-auto came at 0.7% vs. 0.3% consensus.

Jobless Claims

Initial Claims came at 216K vs. 217K consensus.

Damocles Sword

Nobody likes the Sword of Damocles hanging over them; certainly not if you are China the second largest economy in the world.

Oil used to be the lifeblood of the economy, but no more. The lifeblood of the modern economy is semiconductors.  The U. S. dominates the semiconductor industry. China is highly dependent on the U. S. companies for semiconductors. During the trade war, President Trump effectively used the U. S. dominance in semiconductors as a Sword of Damocles over China. It is natural for China to aggressively move to attempt to remove this Sword of Damocles.

For investors, it is all about making observations, getting ahead of Wall Street and making money. Which company stock will benefit the most as China attempts to reduce the U. S. dominance in semiconductors? Let’s explore with the help of a chart.

The chart

Please click here for an annotated chart of Applied Materials (AMAT).

Note the following:

  • Applied Materials is a supplier of equipment for semiconductor manufacturing.
  • In its attempt to reduce dependence on the U. S. in semiconductors, China is likely to ramp up its semiconductor manufacturing and design capabilities.
  • There is potential for Applied Materials sales in China to significantly increase over the coming years.
  • Applied Materials is in The Arora Report model portfolio bought at $16. It is trading at $62.30 as of this writing.
  • The chart shows that Applied Material stock has been in a steady uptrend.
  • The chart shows acceleration in the uptrend.
  • The chart shows resistance overhead.
  • The pattern that the price is tracing in Applied Materials stock, in the past, has shown high probability of a break out above the resistance line shown on the chart.
  • RSI shown on the chart indicates that there is room to run up.
  • The chart shows that the volume is low. This is a negative.
  • In the stock market, Applied Materials has significantly outperformed Dow Jones Industrial Average (DJIA) and Nasdaq 100 ETF (QQQ) as well as S&P 500 ETF (SPY).
  • Applied Materials is also a 5G stock.

How and when to buy

Those who are nimble may want to wait for a breakout above the resistance line shown on the chart and buy into the strength with a tight stop. Since this is a long term position in The Arora Report portfolio, we will likely start a trade around position for a shorter time frame on a breakout. We will provide stop zone, target zone and appropriate position size. All investor should use the technique of trade around positions. This technique can often double the returns and reduce the risks.

For those who are not nimble, it may be prudent to wait for a dip in the Arora buy zone to start a long term position.

More tech stocks

Other semiconductor manufacturing stocks that may benefit include Lam Research (LRCX), KLA Corporation (KLAC), Kulicke and Soffa Industries (KLIC) and ASML Holdings (ASML). Semiconductor testing stocks such as Teradyne (TER) may also benefit.

Here are additional semiconductor stocks in the Arora Report portfolio that will benefit.

  • INTC
  • Mellanox (MLNX). Mellanox is in the process of being bought out by NVIDIA (NVDA)
  • MU
  • MXIM
  • NXPI
  • QCOM
  • QRVO
  • SMH
  • XLNX

Among large-cap tech stocks, Apple (AAPL) is the major beneficiary of the trade deal. Benefit to Microsoft (MSFT) may only be slight. Amazon (AMZN), Facebook (FB) and Google (GOOG) (GOOGL) do not do material business in China.

Momo Crowd And Smart Money In Stocks

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

Gold

There is no discernable smart money or momo activity in gold.

For longer term, please see gold and silver ratings.

Oil

The momo crowd is acting like a yo-yo in oil.  Smart money is inactive.

For longer term, please see oil ratings.

Marijuana

The momo crowd is aggressively 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 neutral but expect the market to open up strongly.  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 $1554, silver futures are at $17.96, and oil futures are $57.93.

S&P 500 resistance levels is 3360; support levels are 3288, 3256 and 3223.

DJIA futures are up 94 points.

SIGNING OF THE TRADE DEAL, PRODUCER PRICE INDEX, RUSSIA

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

Trade Deal

The U. S. and China are set to sign the trade deal today.  Wall Street consensus is that the markets should take another leg up on the signing of the trade deal. In our analysis, this ultra-bullish view is dangerous and a ‘sell the news’ reaction cannot be ruled out.

Producer Price Index

Core PPI came at 0.1% vs. 0.2% consensus.

It is important to note that trends have reversed.  For a long time PPI was coming hotter than expected, now it is coming cooler than expected.  The bulls will interpret this as positive for the stock market because it will allow the Fed to keep on printing money.

Beige Book

Beige Book will be released by the Fed at 2:00 pm ET.  It is likely to not move the markets.

Russia

There is a report that Russian Prime Minister Medvedev and others have resigned.  There are no details yet but it is worth keeping an eye.  There may be opportunities in Russia.

Momo Crowd And Smart Money In Stocks

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

Gold

The momo crowd is buying gold as gold has moved above $1550.  Smart money is inactive.

For longer term, please see gold and silver ratings.

Oil

API came at a build of 1.1M barrels vs. consensus of a draw of 474K barrels.  This is very bearish for oil.

EIA data will be released at 10:30 am ET and is likely to be market moving.

The momo crowd is selling oil in the early trade.  Smart money is inactive.

For longer term, please see oil ratings.

Marijuana

The momo crowd is aggressively buying marijuana stocks.  Smart money is inactive.

Technical Patterns

Indian stocks are tracing an inside bar.  This is bearish.  ETF of interest is EPI.

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 the market can go significantly higher if Wall Street is right about the reaction of the trade deal signing.  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 $1553, silver futures are at $17.88, and oil futures are $58.05.

S&P 500 resistance levels are  3288, 3300 and 3360; support levels are 3256, 3223 and 3200.

DJIA futures are down 74 points.

WEAK INFLATION, EXTREME GREED PRODUCES A BAD SETUP FOR THE EARNINGS SEASON STARTING NOW

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

Weak Inflation

Core CPI came at 0.1% vs. 0.2% consensus.  This is supportive of the stock market rise.

Extreme Greed

Earnings are the single best determinate of the stock market in the long term. In the short term, sentiment rules. The strong move up in the stock market last year was 92% not attributable to earnings. The move was triggered by the Fed reversing its policy and then exaggerated by the momo (momentum) crowd and the sentiment.

The sentiment is driven by Fear and greed. CNN Fear & Greed Index stands at 90; this is the area of extreme greed. Our proprietary sentiment indicator at The Arora Report differs from CNN conclusion in that it is not yet at an extreme bullish level; it is simply approaching the extreme zone.

Earnings season is starting. This level of greed is producing a bad setup for the earnings season. Let’s explore with the help of a chart.

The chart

Please click here for annotated chart of Five Below (FIVE).

Note the following:

  • Five Below is a high flying retailer that has been considered Amazon (AMZN) proof.
  • For a retailer, the stock is very expensive and trades at a trailing P/E ratio of 39.
  • The chart shows that the stock gapped down about $25 as it reported poor earnings.
  • In a normal market environment, an expensive retail stock like Five Below would have continued to fall after the gap down at the open.
  • In this market, on the slightest reversal in momentum after the open, the momo crowd aggressively bought the stock as shown on the chart. The momo crowd ran up the stock about $11.
  • Similar behavior has happened in ABIOMED (ABMD), a medical device company, after it reported poor earnings.
  • Delta Airlines (DAL) has reported earnings better than the whisper numbers. But that is a special case because the airline is benefiting from the trouble of other airlines related to Boeing (BA).
  • Among banks, JPMorgan (JPM) and Citigroup (C ) have reported good earnings but Wells Fargo (WGC) reported weak earnings.
  • The vast majority of earnings are still ahead.

A bad setup for earnings

Stocks move based on the difference between the whisper numbers and the actually reported earnings as well as projections. Whisper numbers are different from the published consensus numbers. As the stock market has moved up, whisper numbers continue to go higher and higher. At The Arora Report we monitor economic data from 23 countries. Looking at economic data and the history if earnings, there is a high probability that overall earnings will disappoint.

Should you sell?

The big five stocks carry an extraordinary weight in the popular indexes such as S&P 500 (SPX) represented by S&P 500 ETF (SPY). The big five stocks are Amazon, Apple (AAPL), Facebook (FB), Google (GOOG) (GOOGL) and Microsoft (MSFT). Apple and Microsoft are also in Dow Jones Industrial Average (DJIA). It is conceivable that in the short term stock market may run only based on the earnings from these five stocks and semiconductor stocks while ignoring other earnings. Among semiconductor stocks, the important stocks to watch are Intel (INTC), AMD (AMD), Micron (MU) and NVIDIA (NVDA). Gartner says that worldwide semiconductor revenues totaled $418.3 billion in 2019, down 11.9% from 2018. However semiconductor stocks have had one of the best run ups in the hopes of a great 2020. Unfortunately leading economic indicators do not support market’s conclusion.

Revisit the chart of Five Below linked above. It is conceivable that as long as earnings are good from the biggest five stocks and semiconductor stocks, the stock market will not only ignore poor earnings from other stocks but momo crowd may buy the weakness.

Poor earnings setup is not a red light but a yellow light. It is important for investors to stay extra alert during this earnings season. We will be paying special attention to our proprietary sentiment indicator to give us actionable signals.

Also keep a very close eye on segmented money flows for early indications.

Momo Crowd And Smart Money In Stocks

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

Gold

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

Gold has broken support at $1550 in line with our expectations given yesterday.

For longer term, please see gold and silver ratings.

Oil

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

For longer term, please see oil ratings.

Marijuana

APHA reported poor earnings.

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 neutral but expect the market to open higher.  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 $1544, silver futures are at $17.76, and oil futures are $58.53.

S&P 500 resistance levels are  3288, 3300 and 3360; support levels are 3256, 3223 and 3200.

DJIA futures are up 25 points.

HEALTHCARE CONFERENCE, OPTIMISM OVER TRADE, EARNINGS SEASON

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

Healthcare Conference

The biggest event in the healthcare industry, JPMorgan Healthcare Conference, is underway.   So far, the presentations are generating significant optimism. Also keep in mind that some of the healthcare stocks have run up ahead of the conference.   If the overall momentum of the stock market reverses, there may be a ‘sell the news’ reaction after the conference.

Trade Optimism

Phase 1 deal with China will be signed on Wednesday.  It is old news but the momo crowd keeps on running up the market on the same news.

Earnings Season

Earnings season begins this week.  Whisper numbers have ratcheted up over the last six weeks.  In our analysis the probability of disappointments is high.  Will the momo crowd pay attention?

Momo Crowd And Smart Money In Stocks

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

Gold

The momo crowd is buying gold in the early trade. The speculation is that the support has held on the pullback and now gold should move higher.  In our analysis, this is flawed speculation.  Gold will continue to move up if the stock market runs into trouble.  However, if the stock market does not run into trouble, the upside is limited without any new geopolitical issue.  It is difficult to see gold going over $1,700.  The downside is $1,450.

Smart money is inactive in gold.

For longer term, please see gold and silver ratings.

Oil

The momo crowd is behaving like a yo-yo in oil.  Smart money is inactive.

For longer term, please see oil ratings.

Marijuana

There is no discernable momo crowd or smart money activity.

Technical Patterns

Solar stocks are tracing an engulfing line.  This is bearish.  ETF of interest is TAN.

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. The market can easily swing lower due to very overbought conditions.  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 $1556, silver futures are at $18.04, and oil futures are $59.10.

S&P 500 resistance levels are  3288, 3300 and 3360; support levels are 3256, 3223 and 3200.

DJIA futures are up 89 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 20% – 30% and short to medium-term hedges of  5% – 15% and short term hedges of 0% – 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.

Please click here to take advantage of a FREE  30 day trial.

Check out our enviable performance in both bull and bear markets.

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