WEEKLY MARKET DIGEST: STOCKS RALLY ON POWELL BENDING TO THE MARKET, MARIJUANA SHORT SQUEEZE $DIA $GLD $QQQ $SLV $SPY $TBT $USO

WEEKLY MARKET DIGEST: STOCKS RALLY ON POWELL BENDING TO THE MARKET, MARIJUANA SHORT SQUEEZE $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.

POWELL TURNS MORE DOVISH, TAME INFLATION AND NEWSY DAY FOR CANNABIS

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

Powell Turns More Dovish

In an interview yesterday, the Fed Chair Powell turned even more dovish.

As we wrote yesterday, this is good for the stock market in the short term but increases risks in the long term. If stock market investors are forced by the bond market focusing on risks from Fed’s new found dovishness, expect a down turn in the stock market. For this reason it is especially important to pay attention  to bonds and interest rates.  Of course we do that for you.

Tame Inflation

Core Consumer Price Index (CPI) came at 0.2% vs. consensus of 0.2%.

Momo Crowd And Smart Money In Stocks

The momo crowd is buying stocks in the early trade.  Smart money is lightly and selectively selling stocks in the early trade.

Gold

The momo crowd is getting whipsawed in gold.  With resistance overhead at $1300, gold is range bound this morning. However selling is coming into silver.

Oil

Oil continues to levitate at its present level on optimism over Saudi Arabia cutting production.

Marijuana

A massive short squeeze continues in Canopy Growth (CGC).

The largest shareholder of Tilray (TLRY) has just stated that they do not plan to sell shares after the lockup expiration on January 15. This is causing a short squeeze leg up in Tilray.

The CEO of Aphria (APHA) is stepping down.  APHA earnings were worse than the whisper numbers.

Technical Patterns

Home builders are tracing an inside bar.  This is bearish. ETF of interest is ITB. However, in view of Powell turning dovish, this trade may 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 negative but can turn positive on news.

Interest rates are ticking down and bonds are ticking up.

Currencies are mixed.

Gold futures are at $1292, silver futures are at $15.72, and oil futures are $51.93.

S&P 500 resistance levels are 2594, 2615 and 2631; support levels are 2550, 2500 and 2450.

DJIA futures are down 66 points.

 

FED TURNS DOVISH — GOOD IN THE SHORT TERM BUT NEGATIVE IN THE LONG TERM

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

Fed Turns Dovish

The FOMC minutes show that the Fed has turned dovish.  In plain English this means that the Fed is less likely to raise interest rates in 2019.

In our analysis, the Fed has bowed to the wishes of the stock market and President Trump.  This is good in the short term for the stock market but negative in the long term for the stock market.

The Character Of The Market Is Changing

The Fed turning dovish  has not changed our prior call that the character of this market is changing.  What has worked for the last nine years may not work going forward.  It is high time for investors to learn how to think differently for what is to come and not look so much in the rear view mirror.  It is also high time for investors to start enhancing their skills.

Momo Crowd And Smart Money In Stocks

The momo crowd is selling stocks in the early trade.  The smart money is inactive.

Gold

Money is flowing back into gold as the stock market slips.  The momo crowd is buying gold  The smart money is inactive.

Oil

EIA data for oil was bearish.  Oil ran up in the face of bearish data.  In theory this behavior is bullish for oil.

Marijuana

Marijuana stocks were heavily pumped yesterday.  In general it is better to take partial profits in the strength generated by such pumps.

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.

Interest rates are ticking down and bonds are ticking up.

Currencies are mixed.

Gold futures are at $1292, silver futures are at $15.72, and oil futures are $51.77.

S&P 500 resistance levels are 2594, 2615 and 2631; support levels are 2550, 2500 and 2450.

DJIA futures are down 78 points.

BOSTIC BOOSTS THE MARKET, FOMC MINUTES AHEAD, OIL BREAKS $51, ANALYSTS PUSH CANNABIS

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

Bostic Boosts The Market

Bostic, the president of the Federal Reserve Bank of Atlanta, is boosting the stock market by making dovish comments.

FOMC Minutes

FOMC minutes will be released at 2:00pm ET. They will give clues regarding what Fed officials really think about the economy and monetary policy. We will be carefully analyzing the minutes; this may be a market moving event.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying stocks. The smart money is inactive.

Gold

Money is moving out of gold as the stock market recovers.  The momo crowd is selling gold.  The smart money is inactive.

Oil

Oil sliced through the resistance at $50.00 like  a hot knife through butter.  Oil has now rocketed over $51 as of this writing.

API reported crude inventory draw of 6.1 million barrels vs. consensus of a draw of 3.3 million barrels. This data is bullish.  However enthusiasm should be tempered because the data on gasoline and distillates was bearish.

EIA data will be released at 10:30 am ET.

Marijuana

Two Wall Street analysts are aggressively pushing Canopy Growth (CGC) and Tilray (TLRY).  TLRY option lockup is about to expire on January 15th.

Constellation Brands (STZ),  the major investor in CGC, is being crushed on a major profit warning.

KushCo Holdings (KSHB) is an important indicator as the company provides packaging and ancillary products to the cannabis industry.  It reported higher revenues but disappointing gross margins.

The momo crowd is aggressively buying marijuana stocks.  The 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.

Interest rates are ticking up and bonds are ticking down.

Currencies are range bound.

Gold futures are at $1286, silver futures are at $15.74, and oil futures are $51.21.

S&P 500 resistance levels are 2594, 2615 and 2631; support levels are 2550, 2500 and 2450.

DJIA futures are up 121 points.

WHO IS RIGHT? STOCK MARKET BOTTOM IS IN OR MORE PAIN AHEAD; A CANNABIS MISS

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

Is The Bottom In?

The nature of the media and many analysts is such that it makes it difficult for investors. Last year in September, when the stock market went into a bull trap, the media was promoting analysts with the most bullish projections. On Christmas Eve, which has turned out to be the low so far, the media was promoting bearish analysts and by then many formerly bullish analysts had turned bearish. Now that the market has staged a recovery, many analysts have turned bullish again and the media is promoting bullish stories.

What is an investor to do? Why not figure out a realistic approach? Is the bottom in or more pain ahead? Let’s explore with the help of a chart.

Please click here for an annotated chart of S&P 500 ETF (SPY). Similar conclusions can be drawn from the charts of Dow Jones Industrial Average (DJIA), Nasdaq 100 ETF (QQQ), and small cap ETF (IWM). Please note the following:

  • The chart shows that the Arora buy signal to purchase S&P 500 ETF SPY and for aggressive investors leveraged S&P 500 ETF (SSO) was given on Christmas Eve when massive selling was taking place and many were turning bearish. Hindsight shows that the buy signal was given right at the bottom.
  • As the chart shows, the resistance zone is right ahead. Expect significant resistance in this zone. Many investors who were over invested and were smart enough to not panic on Christmas Eve are likely to sell in this zone. Selling may hit popular stocks such as Amazon (AMZN), Netflix (NFLX), Facebook (FB) and Microsoft (MSFT). Selling may also hit popular semiconductor stocks such as Micron (MU), AMD (AMD) and NVIDIA (NVDA). If Apple (AAPL) rallies close to $160, it may also see selling.
  • RSI shows that the market is getting overbought in the very short term. It is especially important to keep an eye on RSI divergence if the market enters the resistance zone shown on the chart.
  • The chart shows that the Arora portfolios were up to 61% protected with cash and hedges right before the market started falling.
  • The chart shows the Arora signal to reduce cash and deploy it in the market on the probability of a rally given right at the bottom.
  • The chart shows that the volume is relatively low. This indicates that the rally, so far, does not have high conviction.
  • The chart shows that some, but not all, weak hands sold right before Christmas. This is derived from tick trading data and proprietary algorithms. If all weak hands had sold, there would have been significantly more conviction in the rally.
  • The chart shows two prior lows. When many had declared that those were the lows, Arora calls were that those were not the likely lows. One of the reasons behind those spot on calls was that weak hands had not sold. Instead weak hands were buying the dip. I wrote about it both times.

The Plan

Is the bottom in or is there more pain ahead? Investors need to think in terms of time frames. Clearly the bottom is in for the very short term. Longer term is a different story. However, given that this bull market is nine years old, it does not take any special systems or some kind of genius to know that investors need to be somewhat cautious while still holding good positions. Investors ought to follow an adaptive model with a proven track record in both bull and bear markets. An example of such a model is ZYX Allocation Model which automatically changes itself with market conditions. Please click here to see how this is done. The model is now advocating de-risking the portfolio on the rallies. We have been talking about it since the fourth quarter of last year. In plain English the means, more emphasis on evergreen strategies, shift to strategies that do well in late economic cycle and heavier allocation to stocks and ETFs that are somewhat defensive in nature.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying in the pre market.  Smart money is very lightly and very selectively selling.

Gold

Money is coming  out of gold as the stock market rises.  The momo crowd is selling gold.  Smart money is inactive.

Oil

The momo crowd is buying oil ahead of API data.  Smart money is inactive.

Marijuana

ACB is an important marijuana company.  It sees Q2 revenues of C$50-55 million vs. C$67 million consensus and whisper numbers of above C$75 million.  This is a major miss.  However the momo crowd continues to buy marijuana stocks.  Smart money is being cautious after this miss.

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 after the gap open.

Interest rates are ticking up and bonds are ticking down.

The dollar is strtonger.

Gold futures are at $1282, silver futures are at $15.65, and oil futures are $49.27.

S&P 500 resistance levels are 2594, 2615 and 2631; support levels are 2550, 2500 and 2450.

DJIA futures are up 258 points.

 

POWELL BENDS TO THE MARKET, TRADE TALKS BEGIN

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

Powell Bends To The Market

Due to the money printing undertaken by the Fed during the QE period, the Fed has built up a massive balance sheet. A big part of the liquidity generated by the Fed went into the financial markets.  Lately the Fed has been reducing its balance sheet and that is one of the main reasons that the character of the stock market is changing.

Markets are encouraged on Powell saying he would consider managing Fed’s balance sheet reduction based on economic data.  Previously the market had thrown a tantrum on Powell saying that the balance sheet reduction was on autopilot.

This was the main reason behind Friday’s rally.

Trade Talks Begin

Trades talks between the U. S. and China begin. So far the reports are positive.

Brexit

There is considerable uncertainty about Brexit.   In the near future, news about Brexit is a potential risk factor for the markets and a reason for caution.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying stocks in the early trade.  Smart money is inactive.

Gold

Money continues to flow into gold as the dollar weakens.

The momo crowd is buying gold but the smart money is inactive.

Oil

The momo crowd is aggressively buying oil but oil is also approaching a resistance.  This has the potential to cause a pullback.  Smart money is inactive.

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 and can easily swing either way.

Interest rates are ticking down and bonds are ticking up.

Gold futures are at $1295, silver futures are at $15.83, and oil futures are $49.15.

S&P 500 resistance levels are 2550, 2594 and 2615; support levels are 2500, 2450 and 2425.

DJIA futures are up 28  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 17% – 31% and short to medium-term hedges of  5% – 15% and short term hedges of zero.

 

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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