By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
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 market is at the lower band of the support zone.
- On Sunday night, stock futures attempted a rally, but the rally was sold on fears of a Beijing lockdown.
- Earlier this morning, the market was below the lower band of the support zone, but the momo crowd’s aggressive buying has brought it back to the lower band as of this writing.
- The chart shows that the sell off was on heavier volume, whereas the prior day’s sell off was not on heavy volume.
- The chart shows that even the heavier volume was not heavy enough to indicate that this was a bottom. Typically, when volume is very heavy, sellers get exhausted and it leads to a tradable rally.
- RSI is showing a divergence. In plain English, this means that RSI is going higher as the price is going lower. Normally this is a bullish signal. However, this divergence is in the oversold zone and tightly packed. Under these conditions, the signal from RSI often fails.
- 25 million people have been locked down in Shanghai for weeks. Now the fears are that the same thing is about to happen in Beijing. Several other locations in China are being locked down.
- Stocks in Shanghai fell the most in about two years.
- Offshore yuan has weakened by about 1%. For a currency, this is a large move.
- Iron ore futures plunged in China. Ironically, Wall Street was uniformly recommending buying steel stocks near their highs last week. As a full disclosure, ZYX Short has a short position in steel. The position is now very profitable.
- Oil has fallen below $100 on China fears. Ironically, most investors who have been rushing into buying oil now have big losses on their trades. As a full disclosure, ZYX Short has a short position in oil. ZYX Short also has a short position in a popular oil stock. There is also a small oil position in the inverse oil ETF in ZYX Buy. These positions are nicely profitable. In ZYX Allocation, a signal was recently given to take full or partial profits in an oil exploration ETF.
- Other commodities are also plunging.
- The irony is that U.S. investors have been rushing into commodities and commodity stocks headlong to protect themselves against inflation.
- Bonds are being bought on China fears. As a result, interest rates are ticking down.
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.
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.
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin is range bound but below $40,000.
Our very, very short-term early stock market indicator is indeterminable due to pressure from the situation in China at cross currents with aggressive momo crowd buying this morning. 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 $1894, silver futures are at $23.62, and oil futures are $97.37.
S&P 500 futures resistance levels are 4318, 4400 and 4460: support levels are 4200, 4000 and 3950.
DJIA futures are down 86 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 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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