By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
BOJ Defends Yield Curve
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- The chart shows that the stock market is consolidating in the support/resistance zone.
- RSI on the chart shows that the stock market can go either way, but with a higher propensity to go up.
- There is optimism in the stock market on Bank of Japan (BOJ) defending the yield curve.
- The consensus has been that BOJ is in the process of relaxing yield curve control.
- The latest move from BOJ goes against the consensus.
- BOJ is willing to buy unlimited amounts of two and five year notes.
- The move by BOJ is a surprise.
- In yesterday’s Morning Capsule we wrote:
For many institutions, today is the last day for tax loss selling.
- There is relief this morning that the bulk of tax loss selling is over. Stocks impacted by tax loss selling such as Tesla (TSLA) are bouncing.
- There has been a concern in the stock market that the rapid spread of COVID in China may have led to new variants. There is optimism in the market this morning that Italy found no new variants in passengers on a flight from China. Half of the passengers were infected.
- Will Santa come? So far, instead of being up, the stock market is down during the traditional Santa Claus rally period.
- There is aggressive buying by the momo crowd this morning on expectations that Santa has finally arrived.
- Momo gurus are predicting that because of positive seasonality, the stock market will be up from here. It is important to pay attention to what momo gurus are saying because of their huge following, but you also need to know that their job is not to provide accurate objective analysis but to do whatever it takes to run up the stock market.
- What happens next will come down to how hedge funds are positioning for quick short term trades in the new year.
Jobless Claims
Jobless claims came at 225K vs. 220K consensus.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial) stocks in the early trade. Smart money is 🔒 in the early trade.
Gold
The momo crowd is 🔒 gold in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin is range bound.
Markets
Our very, very short-term early stock market indicator is 🔒. 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.
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 $1817, silver futures are at $24.19, and oil futures are at $78.17.
S&P 500 futures resistance levels are 3860, 3950 and 4000: support levels are 3770, 3630 and 3600.
DJIA futures are up 182 points.
Protection Bands And What To Do Now
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding 🔒 in cash or treasury bills or allocated to short-term tactical trades; and short to medium-term hedges of 🔒, and short term hedges of 🔒. This is a good way to protect yourself and participate in the upside at the same time.
You can determine your protection bands by adding cash to hedges. The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive. If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.
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Nigam Arora
Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.
Dr. Natasha Arora
Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.
