By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Bank Of Japan Shocks The Globe
Please click here for a chart of Japanese yen futures (JPY_F).
Note the following:
- Historically, Bank of Japan (BoJ) is known for surprises. Overnight, BoJ shocked markets across the globe.
- The chart shows the big move up in Japanese yen on the jolt from BoJ.
- BoJ is abandoning its present yield curve control after burning through billions of dollars. BoJ is changing the cap for the 10-year government bond interest rate to 0.5% from 0.25%. The rate jumped to 0.4%
- Large investors have been borrowing in yen at the cheap rate and investing elsewhere such as in the U.S. Now such investors have a double problem:
- They may have to pay a higher interest rate.
- Japanese yen is going higher.
- In theory, the impact of the move by BoJ is lower asset prices and higher inflation across the globe.
- Nikkei 225, the popular index of Japanese stocks, fell 2.46%.
- Yen moved about 3% against the dollar. This is a very large move for a currency.
- Stock markets across Asia fell.
- Yields in the U.S. rose.
- In the U.S. stock futures first fell, and then the momo crowd aggressively bought the dip. Clearly, the momo crowd has no comprehension of the earthquake that just occurred.
- The chart shows that the yen was stable against the dollar in the early part of the year.
- The chart shows a downward sloping trendline that was in place as the Fed was raising interest rates.
- The chart shows a consistent rise in the yen lately.
- The U.S. stock market did not need another headwind, but it has come now from BoJ.
Housing Starts
Housing starts came at 1.427M vs. 1.395M consensus.
Building permits are a leading indicator. Building permits came at 1.342M vs. 1.480M consensus. This indicates that there is more weakness to come in housing construction.
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
Gold rallied on BoJ action.
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 🔒 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 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 $1814, silver futures are at $23.99, and oil futures are at $75.94.
S&P 500 futures resistance levels are 3860, 3950, and 4000: support levels are 3770, 3600, and 3520.
DJIA futures are down 12 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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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.
