By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Making China Richer
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:
- First and foremost, we are politically neutral. Our sole job is to help investors.
- Trump was the only president who was concerned with the massive transfer of wealth from the U.S. to China. To reduce the outflow of wealth to China, Trump imposed tariffs on Chinese goods.
- Lately, politicians have been urging President Biden to remove tariffs on Chinese goods. Such a move would provide instant gratification by reducing the cost for Americans addicted to cheap Chinese goods. What about the long term negative impact for the U.S.?
- There is optimism and stocks are being bought on the plan for Biden to review the tariffs on Chinese goods and potentially remove or reduce the tariffs.
- The chart shows there is buying on technicals.
- We warned you in advance:
There are likely a large number of stops right under the top band of the support zone. Putting stops at such an obvious place is like putting your cash in the middle of the street where everyone can see it for the purpose of protecting your cash. Unfortunately, gurus continue to teach this way of putting stops and investors continue to get burned.
It is common for hunt and destroy algorithms employed by smarter traders to take out these stops. Typically, once these stops are taken out, the market bounces.
- The chart shows that the advanced warning from The Arora Report has proven spot on. Stops were taken out. Once the stops were taken out, the market bounced.
- Many using traditional technical analysis are using Friday’s price action on the chart as a buy signal.
- The chart shows there was a divergence on RSI. In plain English, this means as price went lower, RSI stayed higher. There is buying in stocks on this divergence.
- Month-end rebalancing is ahead. Due to heavy losses by funds in stocks, funds are likely to heavily buy stocks between now and the end of the month to rebalance. Estimates of such buying range from $11 – 35B. Such buying is not based on analysis because the stocks are about to go up but rather a mechanical approach by those who are not able to do great analysis.
- The Memorial Day holiday is ahead. Historically, there is positive seasonality as investors are typically in a good mood before a holiday and buy stocks.
- Will all of these very very short term positives overcome the selling arising from a deteriorating macro picture?
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
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 🔒 oil 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 🔒 but can quickly turn 🔒. 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 $1855, silver futures are at $22.03, and oil futures are $111.49.
S&P 500 futures resistance levels are 3950, 4000 and 4200: support levels are 3860, 3770 and 3630.
DJIA futures are up 285 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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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.
