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.
BLOWOUT JOBS REPORT, MOMO BUYS STOCKS, ITALIAN AND SPANISH BONDS RISE
To gain an edge, this is what you need to know today.
Blowout Jobs Report
Nonfarm Private Payrolls came at 218K vs. 177K consensus.
Average Hourly Earnings rose 0.3% vs. 0.3% consensus.
Average Work Week came at 34.5 vs. 34.5 consensus.
The report shows that the U. S. economy continues to be strong and this is a positive for stocks. On the negative side, the stronger jobs report means higher interest rates.
Momo Crowd And Smart Money
The momo crowd is aggressively buying stocks in the early trade. The buying is especially heavy in popular technology stocks and other high beta stocks.
The smart money is inactive.
Italian And Spanish Bonds Rise
In Italy, President Mattarella has given his go ahead to Giuseppe Conte to form the populist government.
Italian bonds are rising.
In Spain, Prime Minister Rajoy has been forced out of the office. Pedro Sanchez is the next prime minister. Sanchez is likely to pursue a moderate policy regarding the euro.
Spanish bonds are rising.
Trade War
Yesterday the market fell on concerns about the trade war after Trump imposed tariffs. This morning the market has completely forgotten about the trade war. However this concern may arise again.
Gold
Significant selling has come in gold after the jobs report on the prospect of higher interest rates. Higher interest rates are bad for gold.
Oil
Light selling was occurring in oil before the jobs report. Strong jobs report means a strong economy and more demand for oil. After the report there is mild buying in oil.
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 but can easily reverse.
The dollar is stronger.
Interest rates are rising and bonds are falling.
Gold futures are at $1295, silver futures are at $16.38, and oil futures are $66.44.
S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.
DJIA futures are up 190 points.
ITALIAN BONDS RALLY AND TRADE WAR MAY BE BACK
To gain an edge, this is what you need to know today.
Italian Bonds Continue To Rally
Italian bonds continue to rally. The yield earlier fell to below 1%. As a reference, when the situation first arose, the yield spiked to 2.35%.
Nothing has fundamentally changed. It is just market mechanics at work.
Tariffs
It appears that Trump is set to put tariffs on steel and aluminum coming from the European Union. If Trump provides further extension, this will be a positive. On the other hand if tariffs go through as scheduled, this will generate negative sentiment in the stock market.
Momo Crowd And Smart Money
The momo crowd is lightly buying in the early trade.
Initial Jobless Claims
Initial Jobless Claims came at 221K vs. 227K consensus.
Personal Income And Personal Spending
The U. S. economy is about 70% consumer based. This is the reason to pay special attention to personal income and personal spending.
Personal Income came at 0.3% vs. 0.3% consensus. Personal Spending came at 0.6% vs. 0.3% consensus.
Gold
Gold is staying above $1300 in lackluster trading.
Oil
Oil first rose as OPEC and Russia tried to walk back the prospect of easing production cuts. At 4:30 pm API data came at a build of 1.0 million barrels vs. consensus of a decline of 600 thousand barrels. Oil fell on the data. The market is waiting for the EIA inventory data that will be released at 10:30 am ET.
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, the market can swing either way on news and rumors related to tariffs.
Currencies, interest rates and bonds are range bound.
Gold futures are at $1304, silver futures are at $16.50, and oil futures are $67.47.
S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2700, 2688 and 2661.
DJIA futures are down 74 points.
CALM ON A RELIEF RALLY IN ITALIAN BONDS, TRUMP’S FLIP, BEIGE BOOK
To gain an edge, this is what you need to know today.
Calm On Relief Rally In Italian Bonds
Yesterday’s plunge in two-year Italian bonds was the culprit in the stock market fall. This morning a very strong relief rally has occurred in the same bonds calming the markets.
Trump Flip Causes Concerns
Yesterday morning it appeared like Trump was close to striking a deal with China. Yesterday afternoon, Trump appears to have flipped regarding China. This may be a negotiating tactic. There is a report that Trump is considering tariffs on Chinese imports again.
This flip caused a sell off in Asian markets.
If it was not for this flip, there would likely have been a stronger rebound in the U. S. stock market.
Momo Crowd And Smart Money
The momo crowd continued to aggressively sell until late yesterday. In the late afternoon, the momo crowd started aggressively buying stocks. The momo crowd continues to aggressively buy stocks this morning.
The smart money is inactive.
Beige Book
The Fed will release the Beige Book at 2:00 pm ET. This may be a market moving event.
GDP
Q1 GDP-Second Estimate came a 2.2% vs. 2.3% consensus.
ADP Employment Change
ADP Employment Change came at 178K vs. 183K consensus.
Gold
There is buying in gold as the dollar weakens.
Oil
Trading in oil is listless as traders await API inventory data to be released at 4:30 pm ET.
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 but can quickly turn negative.
Interest rates are rising and bonds are falling as the safe haven money that bought bonds yesterday is being to move out.
Gold futures are at $1305, silver futures are at $16.44, and oil futures are $67.01.
S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2688, 2661 and 2631.
DJIA futures are up 119 points.
PRICES IN ROME CAUSING NEGATIVE SENTIMENT
To gain an edge, this is what you need to know today.
Crisis In Rome
Power struggle in Italy is causing negative sentiment across the globe. The power struggle is between pro-EU establishment and Eurosceptic populists who were victorious in the March election. Italy is heading toward another election. The concern is that the election will become an implicit referendum on the euro.
Italian Bond Melt Down
The yield on Italian two-year bond rocketed to over 2.5% after having been below 0.3% recently. This is a huge move.
Momo Crowd And Smart Money
The momo crowd is aggressively selling stocks in the early trade. The smart money is inactive.
Gold
Gold normally benefits from crisis. Significant buying was coming into gold earlier today. However, selling is coming into gold as of this writing because the dollar is strengthening. Gold is priced in dollars. For this reason as the dollar strengthens, gold weakens.
Oil
Oil is falling on Saudi and Russia talking about easing production cuts. The Morning Capsule on May 24th stated:
Oil is being aggressively sold on reports that OPEC and Russia are looking at easing production cuts.
The Morning Capsule of May 23rd stated:
Lately oil has been rising. We have previously shared with you that this was positive for the stock market in the short-term. Yesterday afternoon a rumor arose that OPEC may increase oil production. Oil has dipped only slightly on the rumor but it has caused a bigger sell off in oil stocks and dampened the optimism.
The rumor turned out to be true on Friday May 25th causing the start of a deep selloff in oil.
Earlier this morning, the momo crowd was aggressively selling oil. As of this writing, the momo crowd has switched and is aggressively buying oil. The real reason appears to be that oil became very oversold and as it started bouncing off of the low to relieve the oversold condition, the momo crowd switched from selling to buy.
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 negative but can reverse quickly.
Safe haven money is flowing into bonds causing yields of U. S. bonds to fall and bond prices to rise.
Euro is weaker on the crisis in Italy.
Gold futures are at $1297, silver futures are at $16.31, and oil futures are $67.23.
S&P 500 resistance levels are 2740, 2765 and 2800; support levels are 2688, 2661 and 2631.
DJIA futures are down 172 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 20% – 35% and short to medium-term hedges of 15% – 25% and very short term hedges of 10%.
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