By Nigam Arora & Dr. Natasha Arora

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

Momo Gurus Advance A New Narrative

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 the market is now higher than when the omicron news was announced.
  • The chart shows that RSI is approaching overbought but has room to run to the upside.
  • The chart shows that the market is at a resistance zone near an all-time high.
  • We previously wrote:

Many investors make the mistake of thinking that the job of the momo gurus is to analyze the markets objectively and guide investors.  This could not be farther from the truth.  The sad reality is that the job of the momo gurus is to persuade investors to keep on buying no matter what the data is.

  • Momo gurus have developed a new narrative to push the market above the resistance zone.
  • Momo gurus need a new narrative because the Fed has changed its colors.  The prior momo narrative was that the Fed was printing money and some of that money was going into the stock market.   This was the main reason to buy stocks.  Now the Fed is turning from dovish to hawkish.
  • The Fed is meeting tomorrow and Wednesday.  The policy decision will be announced on Wednesday at 2:00 pm ET.
  • Historically the momo bought ahead of the Fed meeting in anticipation of a dovish Fed.
  • Here is the new narrative from momo gurus to persuade the momo crowd to buy stocks and ignore the risks.
    • The Fed will be accelerating taper but will still be printing money for a few months.
    • When the taper is done, the Fed’s balance sheet will stand at $9 trillion due to all the money printing the Fed has done.   Prior to the financial crisis, the Fed’s balance sheet was under $1 trillion.
    • Historically, a large Fed balance sheet has been negative. However, now the momo gurus are claiming this is positive without any evidence.
    • Even when the Fed starts raising rates, the stock market should go up.  This has been true in some prior cycles, but in those cycles, valuations were nowhere near as high as they are now.
    • The Fed’s decision on Wednesday will be a clearing event and that is the main reason to buy stocks now.
  • Will momo gurus succeed as the Fed now has a different posture and Biden is having difficulty borrowing more money?

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🔒.  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 $1784, silver futures are at $22.26, and oil futures are at $71.45.

S&P 500 futures resistance levels are 4713, 4770, and 4900: support levels are 4600, 4460, and 4400.

DJIA futures are down 62 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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Nigam Arora

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

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.