BOND SELL OFF AT THE FASTEST RATE BUT STOCK INVESTORS FOCUS ON STOCK MARKET EXUBERANCE

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By Nigam Arora & Dr. Natasha Arora

 

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

Fastest Bond Sell Off

Please click here for a chart of yield on U.S. Treasury Securities at 2-Year Constant Maturity.

Note the following:

  • The chart shows a rapid rise in the yield on 2-year Treasury securities.
  • Yields move inverse to the bond prices.  When bonds sell off, yields move higher.
  • Bond sell off is taking place at the fastest rate since 1973.
  • Normally a rapid rise in yields causes a sell off in stocks.  However, the data is from the time when the momo crowd did not have such strong control over the stock market.
  • For the time being, in the early trade, stocks are ignoring bond sell off and are encouraged by exuberance in China.
  • There is exuberance in China.
    • Chinese leadership seems to like that they are now able to stand up to the U.S. and not sanction Russia over Ukraine.
    • There are hopes that the Chinese government is about to announce new stimulus.
    • The Chinese regulator is telling companies with U.S. listed securities to get ready for audit disclosures.  Until recently, China had not allowed its companies to provide such disclosures.  SEC is threatening to delist Chinese companies if they do not provide such disclosures.  Typically, Chinese companies have three years to comply.
    •  is increasing stock buy back to $25 billion from $15 billion.
    •  reported good earnings.
    • Buy zones on China mainland ETF ASHR, Hong Kong ETF FXI, and China internet ETF  will be updated in ZYX Emerging later today.
  • Exuberance from China was carried to stocks in Europe and in a round robin fashion is now coming to the U.S. in the early trade.
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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 🔒 in oil in the early trade.  Smart money is 🔒 in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin is 🔒.  A break to the upside above $43,500 has the potential for a substantial rally.

Markets

Our very, very short-term early stock market indicator is positive.  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 $1929, silver futures are at $25.14, and oil futures are $110.70.

S&P 500 futures resistance levels are 4600, 4713 and 4770: support levels are 4400, 4318 and 4200.

 futures are up 161 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 short-term bond funds 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.

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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.

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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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