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.
LONGEST RUN SINCE 1997, LOW VOLATILITY SEPTEMBER, NEW QUARTER MONEY ABOUT TO POUR IN, GOLD BUYING IN ASIA
To gain an edge, this is what you need to know today.
Economic Indicators
Three important economic indicators were released this morning.
The Fed is believed to pay attention to Core PCE Prices. For this reason we also pay attention to this data. It came at 0.1% vs. 0.2% consensus.
American economy is about 70% consumer based. For this reason we pay attention to personal income and personal spending.
Personal income came at 0.2% vs. 0.2% consensus.
Personal spending came at 0.1% vs. 0.1% consensus.
There is nothing in these numbers to stop the momo (momentum) crowd from continuing to aggressively buy stocks.
Smart Money In Stocks
Our algorithms are showing the ‘smart money’ is not buying into this quarter end window dressing driven rally. It is also of note that the smart money is not selling either.
The Longest Run Since 1997
World stocks will end today with the longest quarterly run since 1997.
Back then, stocks continued to run up in 1998 and 1999 before crashing in 2000.
Low Volatility September
September is traditionally one of the weakest months of the year along with October. Traditionally September also sees high volatility.
This September has not been weak and has seen very low volatility. There are two interpretations.
- This typically happens before a crash.
- Since investors are excited about tax reform, any factors related to market mechanics will not occur this time.
In our analysis, it is important to be on alert but not give in to the predictions of gurus who keep on calling for crashes at this time. Many gurus were calling for a crash in September but now we know those predictions were wrong. The most prudent course of action is described in the ‘What To Do Now’ section below.
New Quarter Money About To Pour In
Yesterday we shared with you about how quarter end window dressing was propping up the market. 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.
Gold Buying In Asia
There was significant gold buying in Asia overnight.
Stops have already been hunted so there is no downward pressure from stop hunting as it has run its course. Early trading in the U. S. is listless.
The smart money is inactive in gold at this time.
Oil
The oil short squeeze is over. According to our algorithms, the short squeeze that has in part driven this rally is now over.
Technical Patterns
Oil had an Outside Day. This is bearish. ETF of interest is USO. We do want to comment that in this case fundamentals may negate this technical pattern.
Brazilian stocks are tracing an Inside Bar. This is bullish. ETF of interest is EWZ.
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.
Interest rates, bonds and currencies are range bound.
Gold futures are at $1289, silver futures are at $16.81, and oil futures are $51.50.
S&P 500 resistance levels are 2550 and 2615; support levels are 2450, 2425, and 2400.
DJIA futures are down 15 points.
BOND ROUT, STRONG ECONOMIC DATA, SMART MONEY CALL ON TECH STOCKS
To gain an edge, this is what you need to know today.
Bond Rout
Bonds are being sold aggressively across the world. This is the result of Yellen’s hawkish comments that we shared with you yesterday.
Strong Economic Data
The data released this morning shows that the U. S. economy continues to be strong.
Q2 GDP- Third Estimate came at 3.1% vs. 3% consensus.
Initial Jobless Claims came at 272K vs. 275K consensus. This is a leading indicator and as such carries heavy weight in our models.
Tech Stocks
Right after tech stocks hit their recent low after a sell off, we shared with you in the Morning Capsule,
The ‘smart money’ is mostly not selling tech stocks in the early trade and lightly buying select tech stocks after yesterday’s sell off in tech stocks.
We also shared smart money flows for popular tech stocks in ZYX Buy indicating that a short term bounce was in order. That call has now proven spot on as tech stocks bounced from the exact point of our publication.
This morning in early trading, the momo crowd is aggressively buying what smart money is lightly selling. It is worth while at this time to review what smart money was doing on September 1st when popular tech stocks were hitting new highs.
Window Dressing
It is quarter end. Near the quarter end, many money managers buy stocks that have done well during that quarter so that they can show their clients next month that they were holding popular stocks. This phenomena was in part responsible for some of the buying yesterday.
Gold
Gold is under slight pressure as stops of the momo crowd continue to be hunted. On a fundamental basis, Yellen turning hawkish on interest rates is a big negative for gold.
Interestingly, the smart money is not selling gold here. The reason is that the smart money holds gold in the context of their overall portfolio and gold forms a good hedge.
Oil
A short squeeze is occurring in oil after prior reports from Turkey and Nigeria which we previously shared with you.
Technical Patterns
Several retail stocks are tracing a Megaphone Bottom. This is bullish but only on a pullback first. ETF of interest is XRT.
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.
Gold futures are at $1287, silver futures are at $16.83, and oil futures are $52.57.
S&P 500 resistance levels are 2550 and 2615; support levels are 2450, 2425, and 2400.
DJIA futures are down 44 points.
HAWKISH YELLEN, DECEMBER RATE HIKE, TAX REFORM OPTIMISM AND MOVE OUT OF GOLD
To gain an edge, this is what you need to know today.
Hawkish Yellen
In a speech yesterday, Yellen was more hawkish than expected.
December Rate Hike
After Yellen’s speech the probability of a rate hike in December has moved to 70%.
Higher Dollar
Dollar has moved up strongly on higher probability of a rate hike in December.
Money Moves Out Of Gold
Money is moving out of gold on a higher probability of a rate hike in December and a stronger dollar.
Tax Reform Optimism
Trump will give a speech in Indiana today on tax reform.
Move Into Stocks
In early trade, money is moving into stocks on optimism over tax reform.
Technical Patterns
Several Indian stocks are tracing an Inside Bar. This is bullish. 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 positive
The momo (momentum) crowd is aggressively buying oil.
Bonds are lower and interest rates are higher.
Gold futures are at $1287, silver futures are at $16.78, and oil futures are $52.08.
S&P 500 resistance levels are 2550 and 2615; support levels are 2450, 2425, and 2400.
DJIA futures are up 52 points.
OPTIMISM IN STOCKS AND SAFE HAVENS RETREAT ON DIALING DOWN OF N. KOREAN TENSIONS, TURKEY THREAT MOVES OIL
To gain an edge, this is what you need to know today.
N. Korean Tensions Dialed Down
Yesterday safe havens like gold spiked on a statement by North Korean foreign minister that U. S. has declared war on North Korea.
Trump administration has come out and clearly said that it has not declared war on North Korea.
Stocks
There is an optimism in stocks this morning due to the following:
- Dialing down of North Korean tensions to optimism over tax reform.
- The ‘smart money’ is mostly not selling tech stocks in the early trade and lightly buying select tech stocks after yesterday’s selloff in tech stocks.
Gold
Gold is retreating on dialing down of North Korean tensions.
A very important development in China that has the potential to move gold up many times over the very long-term is making progress. We will do a separate post on the subject.
Oil
Turkey’s threat to shut down the pipeline that exports oil from Kurdistan is moving oil higher. There are also reports of strong demand from China.
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 positive.
The euro is weaker in the wake of German elections.
Interest rates are ticking up and bonds are ticking down.
Gold futures are at $1304, silver futures are at $17.03, and oil futures are $51.88.
S&P 500 resistance levels are 2500, 2550 and 2615; support levels are 2450, 2425, and 2400.
DJIA futures are up 15 points.
TRUMP TAX PLAN POSITIVE FOR STOCKS, GERMAN ELECTION RESULTS HIT GOLD, ABE’S GAMBLE, OIL MOVES ON NIGERIA
To gain an edge, this is what you need to know today.
Smart Money In Stocks
In early trade, the ‘smart money’ is lightly selling stocks but the momo (momentum) crowd is buying stocks.
Trump’s Tax Plan Positive For Stocks
Trump and Republican leaders are likely to release a tax framework this week. The reports are that the plan will cut corporate top tax rate to 20% from 35%, Trump had been aiming for 15%. There is likely to be a new 25% rate for pass through entities used by small business. Top individual tax rate is likely to be cut to 35%.
The stock market is likely to react positively to this tax plan. Even if there is a selloff in the stock market, the prospect of a tax reform will dampen any decline.
Trump is planning to travel to Indiana to talk about taxes Wednesday. Trump may push for a 10% tax for the middle class to preempt attacks by Democrats.
German Election
Angela Merkel won the election but with a smaller vote share. A far right party gained stronger than expectations.
Euro
The euro has dropped on German election results as the coalition building is likely to be complex and take a long time, as well as on strong showing by a far right party.
German Election Results Hit Gold
Gold is priced in dollars. The dollar is getting stronger as the euro weakens. This is hitting gold. Gold is also suffering from stops being hunted.
There is no buying by the smart money in gold.
Abe’s Gamble
Japan’s Prime Minister, Abe, has announced a snap election and is dissolving the lower house of the parliament ahead of the election.
Abe is also announcing a stimulus package. The stimulus package is helping yen recover from its earlier losses.
Japanese And European Positions
There are a number of Japanese and European positions in our portfolios. The reason is that these markets are much cheaper than the U. S. market. We will be doing separate posts on these positions as more data becomes available.
Oil Moves On Nigeria
Oil is moving on the news that Nigerian output is below 1.8 million barrel quota.
OPEC’s meeting did not announce any major decisions but reported strong compliance with quotas. This is helping oil break out of the resistance around $51.
Technical Patterns
Several energy stocks are tracing a Megaphone Pattern. This is bullish. ETF of interest is XLE.
Taiwanese shares are tracing a Diamond. This is bearish. ETF of interest is EWT.
Italian shares are tracing a Shooting Star. This is bearish. ETF of interest is EWI.
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.
Gold futures are at $1295, silver futures are at $16.93, and oil futures are $51.28.
S&P 500 resistance levels are 2500, 2550 and 2615; support levels are 2450, 2425, and 2400.
DJIA futures are down 20 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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