By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
In Fed We Trust
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows that RSI had become very oversold.
- As we have been stating, when a market becomes oversold, it tends to bounce.
- The chart shows that momo buying has caused the market to bounce.
- The chart shows that during the decline, the market did not even touch the support line. This is a positive.
- The chart shows that the market closed above the support/resistance line. If this had not occurred on a Friday, this would have been considered positive. The bounce on Friday was, in part, a short squeeze.
- The chart shows that this morning the buying has eased causing the market to pull back to the support/resistance line.
- From a macro perspective, the market participants can now be divided into three camps.
- ‘In the Fed we trust’ crowd. This crowd is mostly made up of the momo crowd. This crowd believes the Fed in that inflation will be transitory and $120 billion a month of money printing is a ‘free lunch.’
- The second camp is of a small minority that believes the Fed is wrong. At a time when the housing market is red hot and mortgage rates are low, how does it make sense for the Fed to print money to buy mortgage securities hand over fist to cause the house prices to go even higher?
- The third camp mostly consists of smart money, is not taking a definitive stand but is highly skeptical of the Fed’s position.
Bitcoin
Over the weekend, Elon Musk drove bitcoin lower with his tweets. There was concern that Tesla (TSLA) was either planning to or might sell its stash of bitcoin. As of this writing, bitcoin is stabilizing on the belief that TSLA has not sold bitcoin.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial) in the early trade. Smart money is🔒.
Gold
The momo crowd is 🔒 gold in the early trade. Smart money is🔒.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒.
For longer-term, please see oil ratings.
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 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 $1846, silver futures are at $27.60, and oil futures are $64.91.
S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.
DJIA futures are up/down 113 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, on dips, 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.
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, 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 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 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.
