By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Important Earnings Ahead
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 the stock market has broken to a new high.
- The chart shows the support zone.
- RSI on the chart shows that the stock market is overbought, but the pattern is such that the stock market can go either way.
- For bullish traders, S&P 500 going to 5000 is the magnet, but sentiment may get in the way.
- Sentiment has reached extreme positive. Here are the key points:
- At extremes, sentiment is a contrary signal. In plain English, this means that when sentiment reaches extreme positive it is a sell signal.
- Sentiment is not a precise timing indicator. For this reason, investors should do a comprehensive 360 degree analysis using a proven system with a long track record, such as the adaptive ZYX Asset Allocation model with inputs in ten categories.
- Sentiments tend to fluctuate quickly.
- Positive sentiment tends to result in selling mostly when it stays at the extreme for a few days.
- S&P 500 has made a new high after 511 days after experiencing a 25% bear market. Based on the historical precedent, this pattern tends to produce 10% – 13% positive returns over the next 12 months. It is important to know historical patterns as a reference point, but no investor should rely on them. Prudent investors rely on new data as it comes in.
- There are important earnings ahead that will determine the course of the stock market. Important earnings this week include IBM, TSLA, NFLX, INTC, T, LVS, V, TMUS, AXP, and CAT.
- Leading economic index will be released at 10am ET and maybe market moving.
- 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), and Apple (AAPL).
In the early trade, money flows are negative in Tesla (TSLA).
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.
Gold
The momo crowd is *** in 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 (BTC.USD) is holding above $40,000. Bitcoin bulls are disappointed that whales did not run up bitcoin over the weekend, taking advantage of the low liquidity. However, those who know the whales’ secrets knew beforehand that the probability of whales buying bitcoin over this weekend was low.
For those who are serious about generating profits in bitcoin, both from the long side and the short side, it is imperative to understand the whales’ secrets. These secrets are not publicly available in a synergistic fashion. The best place to learn these secrets is from the podcast series “Whales’ Secrets You Need To Know: Capturing Bitcoin Profits.” Part 2 of the series is now live in Arora Ambassador Club, and we are working on part 3.
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 $2023, silver futures are at $22.05, and oil futures are at $73.73.
S&P 500 futures are trading at 4883 as of this writing. S&P 500 futures resistance levels are 4918, 5020, and 5210: support levels are 4826, 4770, and 4713.
DJIA futures are up 108 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 seven 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.
