WORST STOCK MARKET START SINCE 1939 – BLIND MONEY POURING IN

By Nigam Arora & Dr. Natasha Arora

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

Worse Start Ever For Wall Street’s Popular Portfolio

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:

  • So far, 2022 has been the worst start for the stock market since 1939.
  • In 2022, the popular 60/40 portfolio has had the worst performance ever.
  • For the regular readers of the Morning Capsule, it is no secret that there is turbulence in the stock market for the following reasons.
    • The dominance of the stock market by the momo crowd.
    • Wrong policies by the Fed.
    • Wrong policies by the Biden administration and before that the Trump administration related to the virus.
  • Significant opportunities are ahead. Stay tuned with the Morning and Afternoon Capsules.
  • In spite of the swoon in the stock market, the pure speculation by the momo crowd has not decreased.
    • In a just conducted sale of virtual land by Yuga Labs, investors bought $320M worth of virtual land.
  • The chart shows that volume was heavier during Friday’s selling.
    • The volume was not heavy enough to indicate a bottom.
  • For bears, the lower support zone shown on the chart is a magnet.  Bulls are going to attempt to take a stand right here.
  • On Sunday evening, the momo crowd was buying stock futures.  Buying continued into the early morning.  Light selling is coming in as of this writing.
  • The chart shows that The Arora Report gave a short term buy signal by deploying cash on March 11, one day before the bottom.
  • The chart shows that the market ran up right after the buy signal, and on March 30, The Arora Report gave a call to raise hedges. During this short period,  ran up 13.73%.
  • The chart shows the call to raise hedge was given one day after the top.
    • The momo crowd is excited about the Fed meeting this week. They are expecting a similar rally again.
  • Today is the first day of the month. Blind money is pouring into Wall Street.  Expect this money to be invested in the afternoon.

China

China conducted an emergency meeting with banks to figure out how to get around potential U.S. sanctions in the event of a regional conflict.

Why would China conduct such a meeting in the first place, and more importantly why would China publicize this meeting?

In our analysis, this meeting indicates that China is testing waters about a potential attack on Taiwan at a time when the U.S. is preoccupied with Ukraine.  All bullish investors should take this risk into account.  Consider paying attention to the “Protection Bands And What To Do Now” section below.  

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

Money is flowing out of gold on a very strong dollar.  The dollar is rising because Japanese are selling U.S. bonds.  This is also a big headwind for the stock market.  It is just that the momo crowd is oblivious.  

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 🔒 oil in the early trade.

For longer-term, please see oil ratings.

Bitcoin

There is buying in bitcoin on excitement about virtual land sale bringing in $320M.

Markets

Our very, very short-term early stock market indicator is indeterminable due to too much noise in the data.  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 very strong.

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 $1861, silver futures are at $22.41, and oil futures are $101.

S&P 500 futures resistance levels are 4200, 4318 and 4400: support levels are 4000, 3950 and 3860.

 futures are up 92 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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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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