DEPLOY CASH AND REDUCE HEDGES – BETTER INFLATION DATA

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By Nigam Arora & Dr. Natasha Arora

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

Reduce Cash And Hedges

Consider reducing cash and hedges on better inflation data.

Be forewarned that the changes may need to be reversed quickly as new data comes in.  Make changes based on your ability to be nimble.

This change is to be considered tactical and not strategic.  There are still many risks ahead.

Buy Zones

Within the protection bands and based on personal risk preference, consider buying stocks and ETFs that are in the buy zone.  Even though the momo crowd is likely to run up the market, in your buying, consider your own risk preference because many risks are still ahead.

CPI

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:

  • CPI came much better than expected.  Here are the details:
    • Headline CPI came at 0.4% vs. 0.7% consensus.
    • Core CPI came at 0.3% vs. 0.5% consensus.
    • Jobless claims came at 225K vs. 220K consensus.
  • The chart shows that the stock market is rocketing and has reached above the top band of the support/resistance zone.
  • 10-year yield has fallen below 4% giving additional lift to tech stocks.
  • Even though inflation numbers have come down, the probability of stagflation is very high.  It is important that investors learn deeply about how to invest in a stagflationary environment.  Consider listening to the five-part podcast series on stagflation.  

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.

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Gold

The momo crowd is 🔒 gold in the early trade.  Smart money is 🔒 gold in the early trade.

For longer-term, please see gold and silver ratings.

Oil

The momo crowd is 🔒 oil in the early trade.  Smart money is 🔒 oil in the early trade.

For longer-term, please see oil ratings.

Bitcoin

After falling yesterday, bitcoin is moving up on CPI data. Bitcoin is trading at $17,449 as of this writing.

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 down, and bonds are ticking up.

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 $1737, silver futures are at $21.86, and oil futures are at $86.99.

S&P 500 futures resistance levels are 3950, 4000, and 4200: support levels are 3770, 3630, and 3600.

 futures are up 779 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 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.

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You can determine your protection band 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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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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