By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Positive Pattern
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 is a weekly chart to give you a longer term perspective.
- The chart shows an inverse head and shoulders pattern. This is a bullish pattern. In our backtesting at The Arora Report, this pattern works about 70% of the time.
- The chart shows the measured target from this pattern. The measured target is just below the all time high.
- There are many other traditional technical analysis indicators that are also on a buy signal.
- Keep in mind that traditional technical analysis no longer works as well as it used to. This is the reason that The Arora Report has developed proprietary indicators that work much better in present day market conditions.
- RSI shown on the chart is giving a buy signal.
- The stock market is running up this morning on excitement created by Disney (DIS) and Tesla (TSLA).
- Disney is restructuring and will operate as three units. Disney is also embarking on a $5B cost cutting program. DIS stock is down from the after hour highs yesterday evening, but it is still up 5.6%.
- Excitement from TSLA stock is spilling over to other stocks. The excitement in Tesla is due to TSLA stock crossing $200. TSLA stock has doubled from its January 6, 2023 low. Investors who sold TSLA stock about a month ago close to $100 are now aggressively buying because TSLA has crossed above $200. Among the momo crowd, a popular strategy is to buy high in the hope of selling higher.
- As a full disclosure, The Arora Report target zone on Tesla, given well in advance, was $190.36 – $210. TSLA is trading at $207.59 as of this writing in the premarket.
- Good earnings from European industrial company Siemens (SIEGY) are also adding to the positive sentiment.
- Right now the market is in the mode of good news is great news and bad news is good news. For example, Jamie Dimon, CEO of the biggest U.S. bank JPMorgan (JPM), is warning against prematurely declaring victory against inflation. Dimon is also warning that the Fed could raise interest rates above 5% if price hikes are sticky. The market is taking Jamie Dimon’s comments as a positive because right now the mantra is to fight the Fed.
- None of the foregoing negates the fact that the Fed is still set to raise interest rates and continue with quantitative tightening.
Jobless Claims
Initial jobless claims came at 196K vs. 194K consensus. The stock market likes that the number has moved up from the prior 183K.
Layoffs
Disney is laying off 7000 employees.
Affirm (AFRM), the buy now pay later company, is laying off 20% of its workforce.
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.
Gold
Gold has moved above $1900 on weaker dollar.
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
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin is range bound
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 $1900, silver futures are at $22.55, and oil futures are at $77.81.
S&P 500 futures are trading at 4165 as of this writing. S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.
DJIA futures are up 210 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.
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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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.
