By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Buyers Coming In
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows that the last time QQQ bounced from the mini support zone, the high fell short of the low band of the top resistance zone. This is a negative.
- Now, QQQ is back to the top band of the mini support zone.
- RSI on the chart shows QQQ is oversold. Oversold markets tend to bounce and this is exactly what is happening in the early trade.
- Today is the last day for most of the window dressing. This is bringing buyers into the stock market. For more details, please see prior Capsules.
- Yesterday, the selling was due to rising yields. This morning, yields are pulling back slightly. This is lifting the sentiment.
- In a rare piece of good data from China, Chinese industrial profits came at 17.2% year-over-year vs. a drop of 6.7% in the prior month. Stocks in Hong Kong jumped 0.8%.
- China is also injecting liquidity into the market, adding to the positive sentiment.
- The positive sentiment from China is carrying over to the rest of the globe.
- Investors are keeping a close eye on the potential shut down of the U.S. government.
- Durable orders are remaining strong. However, this is a very volatile series in the first place.
- Durable orders came at 0.2% vs. -0.2% consensus.
- Durable goods ex-transportation came at 0.4 vs. 0.3% consensus.
- Big semiconductor memory maker Micron (MU) will report earnings after the market close. The earnings and commentary will have read through for other tech stocks. In full disclosure, there is a Micron position in ZYX Buy in the portfolio that surrounds the Core Model Portfolio.
- 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.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).
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.
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.
API crude inventories came at a build of 1.586M barrels vs. a consensus of a draw of 1.650M 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 (BTC.USD) is seeing light buying.
The fraud related to major crypto platform JPEX is now estimated at over $175M with over 2,300 victims. This is the largest crypto fraud in Hong Kong.
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 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 $1909, silver futures are at $22.87, and oil futures are at $92.18.
S&P 500 futures are trading at 4330 as of this writing. S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.
DJIA futures are up 120 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.
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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