WEEKLY MARKET DIGEST: TRUMP INTERVENTION RUNS GOLD HIGHER AND STOCKS LOWER $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.

TRUMP INTERVENTION RUNS GOLD HIGHER AND STOCKS LOWER, TRUMP REVERSES HIS CAMPAIGN PROMISE

This is what you need to know today.

Trump

Yesterday afternoon Trump unexpectedly verbally intervened in the markets by doing something that presidents seldom do.  Trump said he wants lower dollar.  Trump has made similar statements during his campaign but the expectations as president he would follow tradition.  The tradition is that Treasury Secretary comments on the dollar and almost never directly calls for dollar to go lower.

Trump also reversed on his campaign promise to declare China a currency manipulator.

Stocks Fall On Trump’s Contradictory Agenda

The stock rally is based on Trump policies causing economic growth.  Higher economic growth means higher interest rates.  Higher interest rates mean higher dollar.  Trump’s comments are at odds with his economic agenda.  For this reason stocks fell on Trump’s comments.

Interestingly, Trump comments came just right after the ‘smart money’ had started buying stocks aggressively and from all indications stocks were set for a major rally.

Gold

Yesterday afternoon with gold around $1278, the smart money started aggressively selling gold.  From all indications gold was set for a fall and then unexpectedly Trump’s comments came. Gold flew right after Trump’s comments.

Oil

Oil fell after EIA data yesterday.  Now oil is rallying again on a report that supply and demand are coming into balance.

Brazil

Brazil cut interest rates by 100 basis points from 12.25% to 11.25%.  The decision was prompted to generate growth in the economy as inflation falls towards target of 4.5% +/- 1.5%.

Technical Patterns

Several bank stocks are tracing a Bearish Triangle.  ETFs of interest are KBE and KRE.

Please note that although traditional technical signals are very popular, they no longer work well.  They used to work much better in the 1980’s.  Now they are obsolete but it is worth paying attention to them because a large number of investors act on them.  If they are exclusively followed, you will lose money over a large number of trades over a long period of time. 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 have ticked down since Trump’s comments and bonds are strong.

Yen is beginning to give up some of the gains after Trump’s comments.

Gold futures are at $1288, silver futures are at $18.56, and oil futures are $53.25.

S&P 500 resistance levels are 2363, 2400 and 2450; support levels are 2300, 2288, and 2250.

DJIA futures are down 24 points.

SYRIA CONCERNS LIKELY MISPLACED, MONEY FLOWS INTO SAFE HAVEN ASSETS BUT NOT OUT OF STOCKS, OIL MOVES ON SAUDI REPORT

This is what you need to know today.

Syria Concerns

In our analysis, Syria situation is likely to be contained.  As such, a large amount of money moving into safe haven assets might be misplaced.

Money Flows

The money flows yesterday were unusual.  Often money flows out of stocks into safe haven assets and vise versa.  Yesterday was unusual in that money was flowing into safe haven assets but not materially out of stocks.

The inference from the foregoing in that investors want to stay invested in stocks but are hedging their bets.

Gold

In addition to safe haven buying, the gold move up is primarily due to market mechanics and the momo crowd buying.  There is no ‘smart money’ buying.

After Syria strike, the momo crowd was buying gold aggressively at $1271.  Many correctly concluded the Syria situation was not likely to escalate.  All one had to do was look at the pictures of the missiles.  Russia has air defenses against Tomahawk missiles.  Russia decided not to use its air defenses against incoming American missiles. This was a clear indication that the Syria situation was not likely to escalate.

The momo crowd put their stops under the 200 day moving average around $1260.  Professionals know this kind of behavior.  Hunt and destroy algorithms kicked in taking out the stops.

After Yellen speech the day before yesterday, when gold did not go down, shorts started covering positions putting an upward pressure causing gold to go above the moving average again.  This brought in technical buying.  The momo crowd, that had just sold several dollars lower, started buying again.

Buying in gold picked up as other safe haven assets such as Treasury bonds and yen strengthened.

Amateur short sellers had their stops over the prior high of $1271.  Hunt and destroy algorithms again kicked in taking out these stops moving gold higher.

Please also see ‘Technical Patterns.’

Oil

Oil moved up on a report that Saudi will support extension of production cut agreement.

Technical Patterns

Gold moved higher than the prior high.  This is considered bullish. ETF of interest is GLD.

Several gold miner stocks are tracing out a Bullish Triangle Pattern.  ETF of interest is GDX.

Please note that although traditional technical signals are very popular, they no longer work well.  They used to work much better in the 1980’s.  Now they are obsolete but it is worth paying attention to them because a large number of investors act on them.  If they are exclusively followed, you will lose money over a large number of trades over a long period of time. 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 start out lower.

Interest rates have been lower and bonds have been strong.

Dollar yen has broken support at 110.  In other words, yen is strong.  This is putting pressure on Japanese stocks.

Gold futures are at $1277, silver futures are at $18.34, and oil futures are $53.62.

S&P 500 resistance levels are 2363, 2400 and 2450; support levels are 2334, 2300, and 2288.

DJIA futures are down 21 points.

YELLEN CLEARLY STATES SHIFT IN POLICY, GOLD FLIES ON SAFE HAVEN DEMAND

This is what you need to know today.

Yellen

Yellen clearly stated that the Fed is shifting from healing the economy to maintaining the economy.

This is already well discounted in the markets.  Theoretically there should be no effect.

Gold Flies

The momo crowd bought gold on Yellen speech.  Such buying made no sense.  There is some institutional buying this morning on safe haven demand primarily related to North Korea.

The ‘smart money’ is inactive. (Please also see ‘Technical Patterns.’)

Oil

Oil is holding most of its gains on concerns over Libya.

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

Iron Ore

After over 7% loss in two days, Chinese day traders are back at it again aggressively buying iron ore futures.

Technical Patterns

Gold has crossed 200 Day Moving Average again to the upside.  In theory this is supposed to be bullish.  Please note how many times gold has wipesawed traders trading based on 200 Day Moving Average causing massive losses.  ETF of  interest is GLD.

Several junior gold miners are showing a Bottoming Triangle Pattern.  This is bullish.  ETF of interest is GDXJ

Please note that although traditional technical signals are very popular, they no longer work well.  They used to work much better in the 1980’s.  Now they are obsolete but it is worth paying attention to them because a large number of investors act on them.  If they are exclusively followed, you will lose money over a large number of trades over a long period of time. 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.

Yen is stronger on safe haven demand.

Interest rates are ticking down and bonds are ticking up.

Gold futures are at $1262, silver futures are at $18.06, and oil futures are $52.93.

S&P 500 resistance levels are 2363, 2400 and 2450; support levels are 2334, 2334, and 2288.

DJIA futures are down 14  points.

CHINA SURRENDERED TO TRUMP WITHOUT USING HIS $1 TRILLION WEAPON, YELLEN SPEECH AHEAD, FOOLISHNESS OF THE MOMO CROWD IN GOLD AND IRON ORE

This is what you need to know today.

China Surrender

China did not use its $1 trillion weapon and simply surrendered to Trump. The $1 trillion weapon is the debt owed by the U. S. to China. The surrender comes in the form of a 100 day plan to address goods trade imbalance between the two countries.

Please click here to see the month-by-month trade imbalance with China for 2016 and 2017. The trade balance has not materially fallen since Trump’s election, even though he has used many words to persuasively alter it. Please click here for the annual U.S. trade imbalance from 1960 to 2015.  Note how dramatically the trade imbalance has risen over the years.

As a note of caution, investors should still look at the plan as simply ‘talk’ that may face many obstacles in execution. As has been common with Trump’s initiatives, there are not many details to make a good judgment. China using the $1 trillion weapon to trump Trump is not completely off the table.

Yellen Speech Ahead

Yellen will give a speech at the University of Michigan at 4:00 pm ET.  She will also take questions.  This has the potential to move the markets. We will be watching carefully.

Foolishness Of The Momo Crowd In Gold

The momo crowd is buying at $1270 and is now selling at $1250 – $1253.

Buying at $1270 was foolish because the Syria strike is likely not to be followed with more strikes in the near future.

There is no buying in gold by the ‘smart money.’   Please also see ‘Technical Patterns.’

Foolishness Of The Momo Crowd In Iron Ore

Iron ore has now entered a bear market.  You may recall that not that long ago the momo crowd was aggressively buying iron ore.  At the time, when everybody was a bull on iron ore, we shared with you our insight as to why the momo crowd was wrong.   That insight has now proven spot on.  As a full disclosure, iron ore producer CLF was short sold in ZYX Short Sell Change Alert and a short position is still being held.

Korea

Korean shares are falling as the U. S. moves an aircraft carrier close to Korea.

Technical Patterns

Gold breaks below the 200 Day Moving Average.  This is bearish.  ETF of interest is GLD.

Please note that although traditional technical signals are very popular, they no longer work well.  They used to work much better in the 1980’s.  Now they are obsolete but it is worth paying attention to them because a large number of investors act on them.  If they are exclusively followed, you will lose money over a large number of trades over a long period of time. 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.

Momo crowd continues to buy oil aggressively.

Currencies, interest rates and bonds are range bound.

Gold futures are at $1250, silver futures are at $17.87, and oil futures are $52.78.

S&P 500 resistance levels are 2363, 2400 and 2450; support levels are 2334, 2300, and 2288.

DJIA futures are up 8 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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