BUYING AHEAD OF POWELL ON HOPIUM, KEY APPLE LEVEL, BITCOIN WHALES TAKE PROFITS

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By Nigam Arora & Dr. Natasha Arora

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

Stock Buying On Hopium

Please click here for a chart of Apple stock (AAPL).

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of AAPL stock is being used to illustrate the point.
  • The chart shows AAPL stock has fallen to a critical level – the bottom band of the support/resistance zone.
  • The chart shows where the stops of less informed investors are.
  • If the stock market starts falling, Wall Street’s hunt and destroy algorithms will go into action and take out the stops of less informed investors.
  • On very long term good positions, such as AAPL, prudent investors should consider using hedges when appropriate.  Hedging allows you to hold on to very long term positions.  For those interested in learning about hedging, consider attending the Hedge The Risk seminar.
  • AAPL stock is in ZYX Buy Core Model Portfolio and is long from $4.68.  Even after the drop in AAPL stock price, this represents a gain of 3548%.
  • The chart shows two Arora signals to hedge AAPL stock.
  • The chart shows that the hedges on AAPL are nicely profitable.
  • The chart shows RSI convergence – RSI foreshadowed AAPL stock drop.
  • RSI on the chart shows that AAPL stock is now oversold.  Expect buying to come in on the slightest bit of good news.
  • The chart shows AAPL stock making lower highs.  This is a technical negative.
  • In The Arora Report analysis, the divergence that is developing between AAPL and Nasdaq 100 ETF QQQ is a yellow caution signal for investors.
  • Here is the key question for investors: Will the divergence be resolved by AAPL moving higher or QQQ moving lower.
  • Powell is giving testimony in front of Congress.  Here are the key points Powell will say based on his prepared text:
    • Inflation has eased but remains above the 2% goal.
    • The policy rate is likely at its peak.
    • If the economy evolves as expected, it will be appropriate to begin dialing back policy restraint at some time this year.
    • Reducing policy restraint too soon or too much could result in a reversal of progress on inflation.   
    • We will be carefully listening to the Q&A.  Expect lawmakers to push Powell to cut rates.
  • The momo crowd is aggressively buying tech stocks, crypto, and other junk stocks on hopium that Powell will be dovish in his answers.
  • ADP is the largest payroll processor in the country and uses its data to give an advanced glimpse of the jobs picture ahead of the official jobs report that will be released on Friday at 8:30am ET.  ADP employment change came at 140K vs. 150K consensus.
  • The JOLTS – Job Openings report will be released at 10am ET.  It may be market moving.
  • The Fed’s Beige Book will be released at 2pm ET.  It may be market moving.
  • 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  Nvidia (NVDA), Amazon (AMZN),Microsoft (MSFT), Alphabet (GOOG), Meta (META), and AAPL.

In the early trade, money flows are negative in Tesla (TSLA).

In the early trade, money flows are positive 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

API crude inventories came at a build of 0.423M barrels vs. a consensus of a build of 2.6M barrels.

The momo crowd is *** oil in the early trade.  Smart money is *** in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Yesterday when bitcoin (BTC.USD) reached an all time high of $69,000, bitcoin whales sold to take profits, causing bitcoin to quickly drop below $60,000.  Mom and pop saw the drop as a buying opportunity and have been aggressively buying since then, running up bitcoin to over $67,000.   

If you are a prudent investor and interested in making money from bitcoin, it is important to understand that bitcoin whales are working towards converting their bitcoin into dollars.  For their plan to succeed, masses have to be persuaded to convert their dollars into bitcoin.  For the best way to understand the true nature of bitcoin and how to profit from it in an astute manner, listen to the podcasts in Arora Ambassador Club.  If you are interested and not yet a member of the club, please write us at ambassador@thearorareport.com.

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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 down, and bonds are ticking up.

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 $2145, silver futures are at $24.06, and oil futures are at $79.26.

S&P 500 futures are trading at 5115  as of this writing.  S&P 500 futures resistance levels are 5210, 5400, and 5500 : support levels are 5020, 4918, and 4852.

DJIA futures are up 184 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 seven 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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