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

Counter Intuitive

Please click here for a chart of Dow Jones Industrial Average ETF (DIA) that represent the popular stock market index Dow Jones Industrial Average (DJIA).

Note the following:

  • Serious investors ought to take a few minutes to study the chart.
  • The new report shows that hiring has slowed.  November Nonfarm Payrolls came at 245K vs. 650K consensus.   November Nonfarm Private Payrolls came at 344K vs. 450K consensus.
  • The employment numbers show a big miss.
  • To those with less experience, it seems counter intuitive that the stock market is loving the fact that Americans are having a harder time finding new jobs.
  • The reason the stock market is loving it is because this stock market is not about the economy and value creation.
  • The chart is a monthly chart giving investors a long term perspective.
  • The chart shows the rise in the Fed’s balance sheet from $0.87 trillion before the 2008 financial crisis to about $7 trillion now.  In plain English, this is a fancy way to talk about money printing.
  • The main reasons behind the extraordinary rise in the stock market are money printing by the Fed and excessive borrowing by the government.
  • This market is controlled by the momo crowd.  To the momo crowd, the worse things get such as the bad jobs numbers today, the more money the Fed will print and the more money the government will borrow.
  • Some of the money that the Fed will print and the government will borrow will flow into the stock market causing the stock market bubble to get bigger.

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 🔒.

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 slightly 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 $1844, silver futures are at $24.22, and oil futures are $45.91.

S&P 500 futures resistance levels are 3800 and 4000: support levels are 3630, 3600 and 3520.

DJIA futures are up 97 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.

This post was just published on ZYX Buy Change Alert.

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