WEEKLY MARKET DIGEST: UGLY GDP BUT IGNORE IT, IMPORTANT CHANGE IN FED’S POLICY $DJIA $SPX $QQQ $GLD $SLV $USO

WEEKLY MARKET DIGEST: UGLY GDP BUT IGNORE IT, IMPORTANT CHANGE IN FED’S POLICY $DJIA $SPX $QQQ $GLD $SLV $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.

TWO BIG STOCK MARKET RISKS ARE HIDING IN APPLE, AMAZON, FACEBOOK AND GOOGLE

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

Time To Assess Risks Is Now

Stock market bulls are giddy. What is there to not be giddy about — the stock market mostly goes up and making money seems so easy. While newly minted mom and pop investors are focusing on running up small speculative stocks by their own buying, institutions are hiding in big cap tech stocks. For prudent investors, the time to understand two big hidden stock market risks is now when the market is high. Let’s explore with the help of a chart.

The Chart

Please click here for a chart of Dow Jones Industrial Average ETF (DIA) which represents the popular stock market index Dow Jones Industrial Average (DJIA).

Note the following:

  • To give investors a long term perspective, the chart goes back to the start of the bull market in 2009.
  • The chart compares Dow Jones Industrial Average to S&P 500 (SPX), Amazon (AMZN), Apple (AAPL), Alphabet (GOOG) (GOOGL) and Facebook (FB).
  • As popular as Apple stock is among investors, the chart is an eye opener in that Apple has significantly underperformed the stocks of Amazon, Alphabet and Facebook.
  • Apple just reported blowout earnings in spite of the pandemic. The company also announced a four for one stock split. Apple stock is flying high.
  • Amazon was expected to report great earnings as it became a quintessential utility for consumers during the pandemic. Amazon did better than most estimates.
  • In spite of a boycott by advertisers and an earlier concern that due to coronavirus pandemic, business may cut back on advertising, Facebook earnings were blowout just like Apple.
  • Alphabet earnings were excellent but not a blowout. However by some measures Alphabet is the cheapest of these four stocks.
  • The chart shows that many stocks dipped into the Arora buy zones during the March stock market dip. Buy zones are very powerful for stock market investors. You buy when the stocks dip into the buy zones. It takes patience but it pays off handsomely. For example, Apple stock dipped into the Arora buy zone trading as low as $212.61 not that long ago and is now trading around $410 as of this writing.
  • The charts of Apple, Amazon, Alphabet and Facebook stocks are as bullish as they get. Their earnings are accelerating. If they can produce excellent earnings during a pandemic, imagine what they can do when the economy starts booming and there is a vaccine.  Their market dominance is increasing and so is the range of their offerings.

Two Hidden Risk

Before sending me hate mail for pointing out the risks, understand that The Arora Report is bullish on these stocks. Amazon, Facebook, Alphabet and Apple are in The Arora Report model portfolio. For example Apple was bought at $18.73 and part of the original position is still being held. While many investors focus on the rewards of the stock market it is more important to focus on the risks in  this environment where excessive government borrowing and excessive money printing by the Fed are inflating the stock market bubble. Here are the two hidden risks:

  • A part of the strength in these four companies is that they have become quintessential utilities. Consumers have very little real choice to go elsewhere. Customarily utilities in the United States have been regulated and there have been serious regulatory limits on the profits they can make. If you watched the recent Congressional hearing, you may have already reached an unmistakable conclusion that regulation is coming. It is a question of ‘when’ and not ‘if’.
  • These four stocks have become crowded trades. The best way to understand a crowded trade is to think of a fast moving boat in which everybody is on one side. The boat may keep on going safely for a long time but then it takes only a small wave for the boat to capsize.

Investors ought to properly restructure their stock market portfolios to account for these risks.

Personal Income

Personal Income came at -1.1% vs. -0.9% consensus.

Personal Spending came at +5.6% vs. +5.9% consensus.

Momo Crowd And Smart Money In Stocks

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

Gold

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

For longer term, please see gold and silver ratings.

Oil

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

For longer term, please see oil ratings.

Markets

Our very, very short-term early stock market indicator is neutral but expect the market to open much 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 weaker.

Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.

Gold futures are at $1993, silver futures are at $24.36, and oil futures are $40.20.

S&P 500 futures resistance levels are 3278, 3320 and 3390: support levels are 3228, 3182 and 3155.

DJIA futures are up 53 points.

UGLY GDP BUT IGNORE IT, IMPORTANT CHANGE IN FED’S POLICY

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

Ugly GDP

Q2 GDP Advance came at -32.9% vs. -35.0% consensus.  This is an ugly number but ignore it.  The reason to ignore it is because this is a lagging indicator.  Investors should focus on leading indicators.  An example of a leading indicator is Weekly Initial Jobless Claims.

Jobless Claims

Weekly Initial Jobless Claims came at 1.434M vs. 1.4M consensus.  Even though this number is in line with the consensus, it is nowhere near as strong as bulls had hoped for only a few weeks ago.   Even though the data has deteriorated, the stock market has continued to levitate.  This means that there is more risk in this market than generally believed.

Ugly Data From Europe

Two pieces of data from Europe are especially ugly.

  • Germany’s Q2 GDP came at -10.1% quarter over quarter vs. consensus of -9.0%.
  • Spain’s Consumer Price Index (CPI) came at -0.9% month over month vs. -0.3% consensus.  This indicates deflation.

Change In Fed Policy

The Fed is one of the main drivers of these markets. Success with the markets often comes down to correctly reading the tea leaves of Fed’s actions and what the Fed says.

In our analysis, not explicitly stated as policy by the Fed, there is an important change in the Fed’s policy.  The Fed seems to be artificially targeting the unemployment rate that existed before the coronavirus to the exclusion of long term harm to the American society and the economy likely to result from excessive money printing and other policies.

The implication for investors is that the Fed’s “Whatever it takes” policies are likely to last longer and inflate the bubble much larger.  However this is in the long term.  In the short term the market is technically very overbought and vulnerable to a correction.

Arora’s Second Law

At a time like this, it is worth emphasizing Arora’s Second Law: Nobody knows with certainty what is going to happen next in the markets.

It is important to understand that everything is not knowable.  Run away as far as you can and as quickly as you can from those who claim to know with certainty what is going to happen next in the markets.

Momo Crowd And Smart Money In Stocks

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

Gold

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

The momo crowd is aggressively selling silver in the early trade.

For longer term, please see gold and silver ratings.

Oil

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

EIA data showed crude inventories fell by 10.6M barrels compared with a consensus of a draw of 357K barrels.

For longer term, please see oil ratings.

Markets

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

Interest rates are ticking down and bonds are ticking up.

The dollar is weaker.

Trading futures is not recommended for most investors. The purpose of providing this information below is exclusively to give an indication of the premarket activity that usually guides the activity when the market opens.

Gold futures are at $1949, silver futures are at $23.48, and oil futures are $40.29.

S&P 500 futures resistance levels are 3228, 3278 and 3320: support levels are 3182, 3155 and 3124.

DJIA futures are down 299 points.

HERD IMMUNITY IN MUMBAI, FED DECISION, TECH CEO GRILLING

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

Herd Immunity In Mumbai

This is the important news of the morning even though most media is not reporting it.  In the poorest areas of Mumbai,  herd immunity seems to be developing against coronavirus.  In some tests, six in 10 people have antibodies.

The inference is that even without a vaccine, in due course, the virus will become less of  concern.

Fed

The Fed will announce its decision at 2:00 pm ET.  The consensus is for no change in policy.  If anything, the Fed is likely to be more dovish; the market will love more dovishness in terms of more money printing.

Tech CEO Grilling

Congress will grill tech CEOs of Amazon (AMZN), Apple (AAPL), Alphabet (GOOG) and Facebook (FB).  The biggest risk for these companies is antitrust. In a perverse way, these stocks may go up because the momo crowd buys everything that has news.

Momo Crowd And Smart Money In Stocks

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

Gold

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

For longer term, please see gold and silver ratings.

Oil

API inventory data showed a draw of 6.829M barrels vs. a consensus of a build of 357K barrels.

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

For longer term, please see oil ratings.

Marijuana

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 undeterminable due to significant news ahead.  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 $1955, silver futures are at $24.48, and oil futures are $41.39.

S&P 500 futures resistance levels are 3228, 3278 and 3320: support levels are 3182, 3155 and 3124.

DJIA futures are up 45 points.

GOLD MAY PRODUCE BIGGER GAINS THAN THE STOCK MARKET UNLESS THERE IS A VACCINE

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

Gold To $3,000

I have never been afraid of bold predictions for the stock market, commodities, bonds and forex when rigorous analysis supported such predictions.

Recently I made a bold prediction that gold is on its way to $3,000 unless there is a vaccine and money printing stops. In some ways, this is similar to my call for Dow Jones Industrial Average (DJIA) reaching 30,000 made when Dow Jones Industrial Average was trading in the 16,000 range and nobody was talking about such a high number. I subsequently repeated this call several times. Of special note is that after the stock market rose, most analysts raised their stock market targets to Dow Jones Industrial Average reaching 35,000 or 40,000 but I never raised my target.

Let’s examine gold with the help of a chart.

The chart

Please click here for an annotated chart of gold ETF (GLD).

Note the following:

  • This is a monthly chart giving a long term perspective.
  • The chart shows that The Arora Report gave a signal to back up the truck and buy gold when it was in the $600 range.
  • My long term readers may remember that in 2011 The Arora Report gave a sell signal on gold when it was trading at $1,904 exactly on the day when gold topped out before falling to about $1,000.
  • The chart shows that gold has traced a long base. This is very bullish.
  • The chart shows Arora very long term rating as positive.
  • The chart shows that gold has broken out.
  • The chart shows that gold was added to our model portfolio in March 2020 right before the present run up started.
  • The chart shows that RSI has traced a very bullish long term pattern.
  • The chart shows that in the short term gold is very overbought. When a commodity gets overbought it is vulnerable to a pullback.
  • If there is an effective vaccine, that may stop gold’s march towards $3,000 and gold may even fall.
  • Gold is a hedge against long stock portfolios but it may not act as a hedge against the five popular mega cap stocks of Apple (AAPL), Amazon (AMZN), Facebook (FB), Microsoft (MSFT) and Alphabet (GOOG) (GOOGL).
  • Any pullbacks in gold in the near term should be used to add to the position.
  • In the longer term, keep a close eye on vaccine development.

Momo Crowd And Smart Money In Stocks

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

Gold

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

Smart money is selling silver while the momo crowd is aggressively buying silver.

For longer term, please see gold and silver ratings.

Oil

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

For longer term, please see oil ratings.

Marijuana

The momo crowd is buying marijuana in the early trade. 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 negative.  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  slightly stronger.

Gold futures are at $1934, silver futures are at $24.08, and oil futures are $41.19.

S&P 500 futures resistance levels are 3228, 3278 and 3320: support levels are 3182, 3155 and 3124.

DJIA futures are down 104 points.

FED MEETING, GOLD ON ITS WAY TO $3,000 IF NOTHING CHANGES

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

Fed Meeting

The Fed meeting starts tomorrow.  Expect more of the same — worries about the economy, more money printing and inflating the asset bubble.

Gold On Its Way To $3,000

Gold is on its way to $3,000 if nothing changes.  We will be writing more about this.   ETF  is in ZYX Global Model Portfolios. We will be issuing a new buy zone. Also notice that allocation to gold  in  SIGNAL QUALITATIVE: CURRENT GOLD AND SILVER RATINGS, AND ALLOCATION, REVIEWED DAILY AFTER THE ORIGINAL PUBLICATION was recently increased.

We will also be publishing  a list of gold and silver ETFs and stocks for trading.  In due course you will see more signals as appropriate.

In the very short term, gold is very overbought and vulnerable to a pullback.  The offsetting factor is that the momo crowd aggressively buys gold going into a Fed rate decision.

Durable Goods

Durable Goods Ex-transports came at 3.3% vs. 3.3%  consensus.  The headline number came at 7.3% vs. 6.4% consensus.  This is a very volatile series and no conclusions can be drawn from the report at this time.

Momo Crowd And Smart Money In Stocks

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

Gold

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

Our expectation is that smart money will aggressively buy gold on a pullback.  As overbought as gold is, momentum is simply too strong to the upside and there is a trigger for more upside in the form of FOMC meeting.  All-in-all, it is a high risk moderate reward situation in the short term.

The momo crowd is extremely aggressively buying silver in the early trade.  This is a common behavior as silver has a much higher beta.

For longer term, please see gold and silver ratings.

Oil

The momo crowd was very aggressively buying oil earlier in the morning.  At 8:21 am ET, aggressive selling came into oil.  We are still checking to see what triggered this selling.  Smart money is inactive.

For longer term, please see oil ratings.

Marijuana

The momo crowd is buying marijuana stocks in the early trade. 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 negative but expect the market to open higher and attempt to go even higher in anticipation of the Fed meeting as well as Democrats and Republicans coming together to borrow more money.  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 $1,927, silver futures are at $24.23, and oil futures are $41.60.

S&P 500 futures resistance levels are 3228, 3278 and 3320: support levels are 3182, 3155 and 3124.

DJIA futures are up 83 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 29% – 37% and short to medium-term hedges of  3% – 8% and short term hedges of 3% – 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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