By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
50-Day Moving Average
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:
- Technically oriented investors are hanging their hats on the 50-day moving average and buying stocks.
- The chart shows the 50-day moving average.
- The chart shows five incidents of bounces from the 50-day moving average since March of this year.
- There is nothing inherently magical about the 50-day moving average. Why not a 40-day or a 60-day moving average?
- The only reason the 50-day moving average has worked is that technical investors believe in it and buy when it is touched. Buying by such investors lifts the market and these investors become stronger believers in the 50-day moving average.
- The chart shows RSI is close to the oversold level and has turned flat. This is also encouraging technically oriented investors to buy.
- The chart shows the selloff was on heavy volume. In traditional technical analysis, this is considered a negative. However, investors are dismissing the heavy volume for a good reason. Take a look at the chart – the prior selloffs have been on heavy volume but the market kept on going up.
- Technicals are helpful but investors should not make the decisions based solely on technicals.
- Investors should make their decisions based on an adaptive comprehensive model that has a long proven track record in both bull and bear markets. An example of such an adaptive model with a long proven track record in both bull and bear markets is ZYX Asset Allocation Model. The model has 10 categories of inputs.
Bitcoin
Bitcoin has fallen below $30,000.
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🔒.
Gold
The momo crowd is 🔒 gold in the early trade. Smart money is 🔒.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒.
For longer-term, please see oil ratings.
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 stronger.
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 $1824, silver futures are at $25.18, and oil futures are $66.08.
S&P 500 futures resistance levels are 4318, 4400 and 4460: support levels are 4200, 4000 and 3950.
DJIA futures are up 94 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 existing positions. Based on individual risk preference, consider holding 🔒 in cash or treasury bills or short-term bond funds 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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This post was just published on ZYX Buy Change Alert.
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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.
