WEEKLY MARKET DIGEST: STOCKS LOVE TRUMP, $2 TRILLION WIPEOUT, GOLD BOMBSHELL, KING DOLLAR $DIA $GLD $QQQ $SLV $SPY $TBF $TBT $USO

 WEEKLY MARKET DIGEST: STOCKS LOVE TRUMP, $2 TRILLION WIPEOUT, GOLD BOMBSHELL, KING DOLLAR $DIA $GLD $QQQ $SLV $SPY $TBF $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.

94% RATE HIKE PROBABILITY, GOLD TUMBLES, DOLLAR WINNING STREAK, RECORD FALL IN BONDS

This is what you need to know today.

94% Rate Hike Probability

Yesterday in her testimony before Congress, Yellen did not push back on the idea of a rate hike in December.

According to our analysis, now there is a 94% probability of a rate hike in December.

It is worth a reminder that after a rate hike last year, stocks took a tumble.  This year dynamics are different due to Trump election.  This is a seasonally strong period for stocks. However, it is prudent to be only cautiously optimistic.  Please scroll down to see ‘What To Do Now’ section.

Gold Tumbles

Overnight gold tumbled as low as $1201.30 before aggressive buying kicked in.  There is strong support in the zone of $1200 to $1202.  Be aware that there are many stops right below $1200.  Hunt and destroy algorithms might attempt to take out these stops causing a sharp decline to the zone of $1183 to $1193.

In ZYX Short, yesterday near the highs, net short position on medium and long-term precious metal positions was increased.  In ZYX Buy, very short term miner ETF NUGT was closed out when another rally attempt subsequent to Morning Capsule failed or alternatively when the trailing stop to protect profits was hit.

Dollar Winning Streak

Euro came into existence in 1999, since then, dollar is having the longest winning streak against the euro.

Earlier yen fell past 110 to a dollar.

Record Fall In Bonds

Over the last two weeks, the fall in bonds is more than in any other two week period in the last 25 years.  Over $2 trillion has been wiped out.  Of special concern is unsuspecting mom and pop who thought they were holding safe investment have lost 7 to 8%

Markets

Our very, very short-term early stock market indicator is neutral.  Expect bulls to make an attempt to drive S&P 500 to a new high.  DJIA has been hitting new highs but S&P 500 has not yet hit a new high. Such occurrences are common on Fridays.

After falling, bonds are attempting a weak rally as of this writing.  After spiking, interest rates are slightly pulling back.

Oil is rallying on more OPEC talk.

Gold futures are at $1210, silver futures are at $16.63, and oil futures are $45.46.

S&P 500 resistance levels are 2200, 2222 and 2250; support levels are 2165, 2150, and 2132.

DJIA futures are down 2 points.

BLOWOUT HOUSING AND JOBLESS DATA, BOJ FIRES WARNING SHOT, GOLD RALLY FAILS AND YELLEN ON TRUMP

This is what you need to know today.

Blowout Data

These days, it is almost impossible to become a successful investor without paying attention to the economic data.

Weekly Initial Jobless Claims came at 235K vs. 257K consensus.  Lower the number, the better it is for the economy.  This is a leading indicator and carries heavy weight in our models.

Housing hit it out of the park with starts at 1323K vs. 1178K consensus.  The leading indicator here is building permits which came at 1229K vs. 1200K consensus.

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

Warning Shot

Bank of Japan (BOJ) fired a warning shot to contain rising yields.  BOJ stated that it is committed to buying unlimited amount of bonds at a fixed rate.

Gold Rally Fails

Gold pierced the low end of the resistance band of $1230 – $1233.  Smart money stepped in to lightly sell causing the rally to fail.  The momo crowd attempted to rally gold again by aggressive buying but then came good economic data.  The second rally attempt failed as the momo crowd tends to sell on good economic data.

Lets carefully watch if there is another rally attempt.  How gold behaves at resistance zones is a part of our algorithms.  Investors will find studying the behavior of gold in support and resistance zones very helpful.

Yellen On Trump

Yellen will be in front of Congress today.  She will certainly be questioned on Trump’s policies.  Consensus is that she will be vague.  If she provides clear answers, expect that to be a market moving event.

Markets

Our very, very short-term early stock market indicator is neutral.

Oil has moved up on the news that Russia is working with OPEC with the intention of raising oil prices.

Interest rates are ticking up, bonds are ticking down, and dollar is ticking up on better economic data.

Gold futures are at $1224, silver futures are at $16.91, and oil futures are $46.11.

S&P 500 resistance levels are 2180, 2200 and 2222; support levels are 2165, 2150, and 2132.

DJIA futures are down 7 points.

A NEW BOMBSHELL THAT MIGHT DRIVE GOLD $200 LOWER, U. S. OIL PRODUCTION INCREASES, DOLLAR INDEX AT 13 YEAR HIGH, INFLATION FALLS

This is what you need to know today.

Gold Bomb Shell

In highly informed gold circles, there is talk of a new bombshell that might drop gold price by $200 in one day.  We are in the process of trying to judge the credibility of this talk before providing you with details.

North American momo crowd, oblivious of what may be ahead, continues to aggressively buy gold and silver.

Smart money is absent. Our plan continues to be to give the countertrend rally room and take advantage of it with gold ETF NUGT position in ZYX Buy and to reduce gold ETF hedge GDX in ZYX Short as this countertrend rally matures.

If gold does drop $200 in a day, our tentative plan will be to buy for the very long-term after the fall exhausts itself. 

Oil

A new IEA report suggests that U. S. oil production is increasing.

API Inventory Report shows that oil inventories came at +3.65 million barrels vs. consensus of -1 million barrels.  Yesterday oil ran up about 6% on talk that OPEC official were working hard behind the scenes to reach an agreement.

Based on technicals, after a very bearish API Inventory Report, oil should have fallen about 5%.  Instead, oil continues to levitate showing resiliency.

EIA Inventory Data, which is considered more authoritative, will be released at 10:30 am ET.  This may be a market moving event not only in oil but also in the stock market.

Dollar

Dollar index has crossed over 100, a 13 year high.  In plain English, dollar is breaking out against other currencies.

Inflation Falls

Core Producer Price Index (PPI) came at -0.2% vs. +0.2% consensus.  We do not use headline PPI number in our algorithms because it is too  noisy.  To learn how our algorithms work, please click here.

PPI is a leading indicator of inflation as prices at the producer level tend to increase before they increase at consumer levels.

Our models focus on leading indicators to keep investors ahead of the curve.

Markets

Our very, very short-term early stock market indicator is negative.

Bonds and interest rates are range bound.

Gold futures are at $1226, silver futures are at $17.00, and oil futures are $45.43.

S&P 500 resistance levels are 2180, 2200 and 2222; support levels are 2150, 2132, and 2120.

DJIA futures are down 62  points.

GOLD COUNTERTREND RALLY BUT PHYSICAL SALES ACCELERATE , BASE METALS PULL BACK, PAUSE IN $1.5 TRILLION WIPE OUT , YELLEN AHEAD

This is what you need to know today.

Gold

Gold is in the middle of a weak countertrend rally.  The rally is driven by North American momo crowd buying ETFs.

Strong economic data this morning may cut this countertrend rally short.  Please scroll down to economic data subsection.

There is no buying by smart money.

In India, selling of physical gold is accelerating.  The selling of physical gold is likely to accelerate further.

Soros has sold all of his gold.  This is worth noting because the momo crowd aggressively bought gold earlier this year on the news that Soros had bought gold.  This, in part, was the reason behind this year’s rally in gold.

We encourage new subscribers to read the following article by Nigam on Forbes from about four years ago that is still evergreen.   This will help investors not make mistakes.

Take advantage of the very, very short-term counter trend rally, yesterday near the lows we gave a buy signal on gold miner ETF NUGT for the very, very short-term in ZYX Buy.

We also took advantage of the selling to take partial profits on short position in gold miner ABX in ZYX Short.

There was no signal given in ZYX Allocation because that is for medium to very long-term trades.  The last sell signal immediately after the election in ZYX Allocation still stands.

As is covered in CURRENT GOLD AND SILVER RATINGS, AND ALLOCATION,

For those who are inclined to always have gold in their portfolio, a long allocation of 2 – 4% to precious metals from a very long-term perspective at this time is appropriate.  This is separate and distinct from Model Portfolios and trading positions that are subject to more stringent criteria.

For diversification reasons, our rules limit maximum allocable to precious metals and miners is 20% of the portfolio.  Long time subscribers to The Arora Report have handsomely profited from our prior allocations of up to 20% of portfolio to precious metals both from long and short sides.

Base Metals Pull Back

Iron ore which jumped 27% on Trump election is pulling back 11% this morning.

Copper is pulling back 2.5% this morning.

As a full disclosure, ZYX Short shorted copper right at the top after the election and that position is still being held.

$1.5 Trillion Wipe Out

$1.5 trillion have been wiped out from global bonds since Trump election.  This wipe out is now pausing.

As a full disclosure, in ZYX Buy, yesterday we took a very, very short-term position in inverse ETF TMF.

Also as a full disclosure, the latest portfolio updates in ZYX Buy and ZYX Allocation, inverse ETF TBF has been added for the very long-term.

Economic Data

Retail Sales Ex-auto came at +0.8% vs. +0.5% consensus.

In our algorithms we do not use the headline number and take out auto because auto sales are very volatile and generate noise.  To learn more, please go to click here .

Empire Manufacturing came at +1.5 vs. -0.5 consensus.

Market Moving Event

Yellen will testify in front of Congress on Thursday.  This will be a market moving event.

Markets

Our very, very short-term early stock market indicator is neutral.

Dollar strength is pausing.

Oil is attempting a rally

Gold futures are at $1221, silver futures are at $16.88, and oil futures are $44.63.

S&P 500 resistance levels are 2180, 2200 and 2222; support levels are 2150, 2132, and 2120.

DJIA futures are up 12 points.

STOCK MARKET SAYS, “LOVE YOU TRUMP”; BOND MARKET SAYS, “NO LOVE LOSS FOR TRUMP”

This is what you need to know today.

Love You Trump

The stock market says, “Love you Trump.”  From the low made in futures as Trump was elected to present, stocks have been a rocket ship.  DJIA is at a record high.  What is there not to love?  Trump policies have the potential to produce the following:

  • Less regulation
  • More loans
  • More government spending
  • Better infrastructure
  • Less competition
  • Higher growth
  • Lower taxes
  • Ability to raise prices

No Love Loss For Trump

The bond market says, “No love loss for Trump.”  Ever since the high after Trump election news in bond futures, bonds have been sinking like a lead weight.  This morning the yield on 30-year bonds crossed 3% for the first time since December; yield on 10-year bonds crossed 2.20%.  Bonds move inverse to the yield.  “Why no love lost?”  Consider the following:

  • More government borrowing
  • Planting new seeds of insidious inflation
  • Higher interest rates
  • Rising prices of goods and services
  • Potential crash in housing market
  • Potential bankruptcies of highly leveraged companies.
  • No Chinese, Japanese, Saudi, and Russian buyers of U. S. Treasuries.

Our Analysis

In our analysis, at least in the very short-term, the up move in stocks is over done and the down move in bonds is also over done.  Both are likely to reverse.

Gold

Gold continues under serious pressure as physical demand from India weakens due to Modi’s move.

As a full disclosure, there are substantial positions in gold, silver, and miners in ZYX Short Sell Change Alert.

Markets

Our very, very short-term early stock market indicator is neutral.  However there is strong buying by the momo crowd.  Since the market is very over bought, it can quickly reverse.

Oil has broken support at $43.00 as Iran increases production.

Dollar continues to an upward trajectory. Both euro and yen are under extreme pressure.

Gold futures are at $1221, silver futures are at $17.17, and oil futures are $42.67.

S&P 500 resistance levels are 2180, 2200 and 2222; support levels are 2150, 2132, and 2120.

DJIA futures are up 56 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%.

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