BUYING IN STOCKS ON PULLBACK IN YIELDS, RUSH TO BUY BITCOIN

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By Nigam Arora & Dr. Natasha Arora

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

Buying In Stocks

Please click here for a chart of 7-10 year Treasury bond ETF (IEF).

Note the following:

  • The trendline on the chart shows that IEF has been in a downtrend.  IEF being in a downtrend means that the yield on 10 year Treasuries has been rising.  This has been putting pressure on the stock market.  The chart shows that IEF bounced yesterday and is bouncing more today as yields pull back from the psychologically important 5% level.
  • The pullback in yields is bringing in buyers.
  • Two very important earnings for the stock market are Microsoft (MSFT) and Alphabet (GOOG, GOOGL).  Both report earnings after the market close.
  • As is their pattern, the momo crowd is buying tech stocks ahead of the earnings on hope strategy.
  • Prudent investors need to remember that hope is never a good strategy.
  • For your buying, consider sticking to the proven system with an unrivaled track record that combines the six screens of the ZYX Change Method and the adaptive ZYX Asset Allocation Model with inputs in ten categories.
  • There is also buying coming into the stock market on delays in Israeli invasion of Gaza.
  • Bitcoin and speculative stocks tend to be correlated.  Buying is coming into speculative stocks in sympathy with the surge in bitcoin.  Please scroll down to see the bitcoin section.
  • Earnings are in focus as 30% of S&P 500 earnings are being reported this week.  Among the important companies reporting earnings, earnings from KO, VZ, RTX, DOW, MMM, SHW, GM, and GE are better than expected; earnings from HCA, AGNC, GLW, PKG, and PII are worse than expected.
  • 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.

Japan

We have been sharing with you that the monetary policy in Japan is having a major impact on the U.S. stock market and the impact will likely increase as Bank of Japan (BOJ) tightens its monetary policy.

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BOJ conducted a buying operation to purchase JGBs with maturities between 5 – 10 years and 10 – 25 years.

Japan is considering an income tax cut for individuals.

Europe

European Central Bank (ECB) is likely to pause interest rate hikes and move to shrinking its balance sheet.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Microsoft, Alphabet, Meta (META), Amazon (AMZN), Nvidia (NVDA), and Tesla (TSLA).

In the early trade, money flows are neutral in Apple (AAPL).

In the early trade, money flows are mixed in S&P 500 ETF (SPY) and 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 *** 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

We have been sharing with you for some time that bitcoin (BTC.USD) market cap may add $1T if a spot bitcoin ETF is approved.  We have also been sharing with you the buying pattern in bitcoin.  Retail investors are aggressively buying bitcoin after whales ran it up over the weekend.  Retail investors are now learning about a potential spot bitcoin ETF.

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.

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Interest rates are ticking up, and bonds are ticking down.

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 $1975, silver futures are at $23.01, and oil futures are at $85.46.

S&P 500 futures are trading at 4262  as of this writing.  S&P 500 futures resistance levels are 4318, 4400, and 4600: support levels are 4200, 4000, and 3950.

DJIA futures are up 145 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.

Traditional 60/40 Portfolio

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

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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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