By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
News From China
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:
- The chart shows that the stock market is consolidating in the support/resistance zone.
- RSI on the chart shows that the stock market can go either way.
- There was aggressive buying in stock futures yesterday evening and early this morning on the news from China. China is scrapping quarantine requirements for incoming travelers.
- Stocks in Shanghai were up 1% overnight.
- The momo crowd is aggressively buying Chinese stocks oblivious to the Taiwan risk. Over the weekend, China sent 71 planes and seven ships towards Taiwan. The Chinese show of force is in response to U.S. defense spending bill. President Biden has signed the $858B bill into law. The bill is $45B more than what Biden had requested. The bill authorizes increased cooperation with Taiwan and India to counter China.
- As the morning has progressed, some investors are taking advantage of the strength and selling. As of this writing, Nasdaq futures have turned negative after being up strongly earlier in the morning. S&P 500 futures have given up most of their gains from earlier this morning as well.
- Seasonality is positive.
Two Years Down Is A Rarity
Since 1928, the stock market falling two years straight in a row is a rarity. It has happened only four times:
- Great Depression
- World War II
- Oil crisis in 1970’s
- Dot.com bubble bust in early 2000’s
Momo gurus are adding these statistics to their narrative to persuade their followers to buy stocks.
Japan
China has a choke hold on rare earth minerals. Rare earth minerals are essential to many of today’s technologies. To reduce dependence on China, Japan will start extracting rare earth minerals from the sea bed starting in 2024. As a full disclosure, MP, a U.S. company mining rare earth minerals in the U.S., is in the ZYX Buy Model Portfolio.
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 🔒 stocks in the early trade.
Gold
Gold is moving up on news from China.
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
Oil is moving up on news from China.
The momo crowd is 🔒 in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin is range bound and trading below $17,000.
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 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 $1814, silver futures are at $24.20, and oil futures are at $80.13.
S&P 500 futures resistance levels are 3950, 4000, and 4200: support levels are 3860, 3770, and 3630.
DJIA futures are up 76 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 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.
To take a free 30-day trial to paid services to gain access to more opportunities, please click here.
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.
