WALL STREET’S CALLOUS CALCULATION BASED ON BACK CHANNELS BRINGING IN STOCK MARKET BUYERS, BITCOIN BOOST

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By Nigam Arora & Dr. Natasha Arora

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

Callous Calculation

Please click here for a chart of West Texas Intermediate crude oil futures (CL_F).

Note the following:

  • The chart shows that oil is not moving up this morning.
  • The chart shows oil is significantly below the high it reached before Hamas attacked Israel.
  • The reason the oil is not moving up is that the US has threatened Iran through back channels to not escalate the dispute between Hamas and Israel.
  • To back up this threat the US has sent a second aircraft carrier group to the region.
  • The back channel warnings picked up steam after a statement by Iranian foreign ministers and a statement by Hamas.
  • The Arora Report members are already in the know.  We wrote in the Morning Capsule on October 13th.
  • Prudent investors should notice a statement by Iran’s Foreign Minister Hossein Amirabdollahian in Beirut, Lebanon.  He warned that there was a “real possibility” of opening other fronts if Israel continues to intensify the war in Gaza.

  • Prudent investors should also pay attention to a statement by Ali Barakeh, a senior Hamas official, that Iran and Hezbollah “will join the battle if Gaza is subjected to a war of annihilation.”

  • Wall Street is doing a callous calculation. The calculation is that the US warning through back channels have deterred Iran from using its proxy Hezbollah from opening a second front in northern Israel.  This will allow Israel to crush Hamas.  Wall Street’s calculation is that there will be carnage in Gaza but Gaza residents are poor with an annual income of $1200, they have no army, they have no electricity, no water, no fuel, and very little food.
  • In a matter more important to the stock market, the Biden administration is moving to tighten export controls to prevent China from getting advanced technologies, especially in semiconductors.
  • As we have previously shared with you, semiconductors are the leading sector in the stock market, and semiconductor companies have significant sales in China.
  • As an Arora Report member, you are already in the know from previous Morning Capsules that China has been able to circumvent trade restrictions.  To understand how China circumvents, take a look at this example.  China secretly sets up a company in Thailand.  The Thai company buys cutting-edge technologies from the US companies.  Since it is a Thai company it is not subject to US controls.  The Thai company transfers the technology and equipment to China.  The new restrictions are imposing stricter controls on companies in other nations buying and transferring to China.
  • Chinese chip design companies are also being added to the trade restriction list.  It appears that previously Chinese manufacturers could not get access to advanced US technologies but Chinese design firms could get access.
  • In view of these restrictions, prudent investors should watch semiconductor ETF (SMH), Nvidia (NVDA), Applied Materials (AMAT), and ASML (ASML).
  • As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.
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Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), and Meta (META).

In the early trade, money flows are negative in Tesla (TSLA), Apple (AAPL), and Nvidia due to new US restrictions on China.

In the early trade, money flows are positive in S&P 500 ETF (SPY) and positive in Nasdaq 100 ETF (QQQ).

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 *** in 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 oil in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

The SEC has decided not to appeal in the Grayscale case.  This increases the odds that Grayscale Bitcoin Trust GBTC can be changed to an ETF.  Bitcoin (BTC.USD) is seeing strong buying on this news.

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.

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Gold futures are at $1935, silver futures are at $22.70, and oil futures are at $88.24.

S&P 500 futures are trading at 4375  as of this writing.  S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.

DJIA futures are up 207 points.

Protection Band 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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Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.  Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

 

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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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