STOCK RALLY ATTEMPT DAMPENED BY BIDEN BAN, NICKEL SPIKES 250%

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By Nigam Arora & Dr. Natasha Arora

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

Rally Attempt

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:

  • There was significant buying in stocks in the pre market.
  • Selling came in on the news that Biden will announce a ban on Russian oil at 10:45 am ET.
  • The chart shows that so far the stock market has managed to stay above the low of the Russian attack news.  This is a positive.
  • The chart shows that RSI is diverging.  This is a positive.
  • The chart shows that the volume was relatively low on the drop.  This is a positive for the immediate time frame but a negative for the longer time frame.
  • VIX, after having spiked above 36, is at 35.41 as of this writing.  This is a positive.
    • Ideally, we would like to see VIX spiking above 40 and then pulling back to generate a buy signal.
  • Retests are historically common.  This is exactly what is happening now.  Here is the key question: Will the retest succeed or fail?
    • Bulls are seeing signs that the retest will be successful. They are taking a stand and buying right here.
    • Bears are seeing signs that the retest will fail, and the market will drop to the lower support zone shown on the chart.  Bears are short selling.
  • Several positives are described above.  However, there are several negatives.
    • Total put call ratio was 0.92 yesterday.  This is a negative.  For those wanting next-level information, please listen to the podcast on the subject.
    • Wall Street positioning is positive.  For those wanting next-level information, please listen to the podcast.
    • The advancing declining volume does not indicate a bottom.
    • The number of advancing issues minus the number of declining issues does not indicate a bottom.
    • The sentiment does not indicate a bottom. Those wanting next-level information on sentiment, please listen to the podcast.
    • There is no capitulation.  This is a serious negative.
    • To be successful, investors should consider not being locked in a bullish or bearish opinion.  Instead, stay in neutral and pay attention to the data as it comes. 
  • The only realistic way is for investors to consider the probabilities of the five scenarios discussed in yesterday’s Morning Capsule. 
  • All of the foregoing and numerous other complex factors are turned into actionable information in “Protection Bands And What To Do Now?” section of the Morning Capsule and “Buy Zones And Buy Now Ratings” section of the Afternoon Capsule.  
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Nickel Up 250% In Two Days

Dislocations are beginning to occur at various places.  Nickel is an example.

Here are the key points.

  • Nickel use is increasing because of electric vehicles.
  • Russia is a big producer of nickel.
  • Nickel is primarily traded on the London Metal Exchange (LME).
  • A short squeeze carried nickel up 250% in two days.
  • The short squeeze was triggered by a speculation that the U.S. was considering banning Russian oil.
  • The U.S. has specifically stated that it has no intention of banning Russian metals such as aluminum and nickel.
  • Xiang Guangda, a wealthy Chinese entrepreneur, has apparently suffered billions of dollars of losses on a short position in nickel.
  • Guangda is likely to make money on the other side – he controls Tsingshan Holding, the largest nickel producer in the world.

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 has decisively broken above the psychological resistance of $2000.  We will shortly update SIGNAL QUALITATIVE: GOLD KEY SUPPORT RESISTANCE ZONES AND MONEY FLOWS.

Keep in mind the following.

  • If the war in Ukraine continues or worsens, gold will continue to go up.
  • If there is a cease fire or a resolution, irrespective of all other factors, gold will likely fall.

The momo crowd is very 🔒 gold in the early trade. Smart money is 🔒 in the early trade.

For longer-term, please see gold and silver ratings.

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Oil

Biden is about to announce sanctions on Russian 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

The momo crowd is 🔒 bitcoin. Bitcoin continues to behave like a risk asset and not as a hedge.

Markets

Our very, very short-term early stock market indicator is 🔒 because the market will move based on the details of Biden’s actions and other news.  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 $2023, silver futures are at $26.58, and oil futures are $124.06.

S&P 500 futures resistance levels are 4318, 4400 and 4460: support levels are 4000, 3950 and 3860.

 futures are down 3 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.

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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

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.

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