FED IS WARNING OF ‘PERILOUS CRASHES’

By Nigam Arora & Dr. Natasha Arora

Perilous Crashes

Please click here for a chart of  Nasdaq 100 ETF ().

Note the following:

  • The chart shows that after the rare occurrence of RSI  reaching 100, RSI is still levitating at 97.24. The market is very overbought.
  • We have previously shared with you that the reason is the convergence of various positive factors. November tends to be the best month of the year for the stock market.
  • In an 85 page report, released minutes after the market close, the Fed is warning that as asset prices keep rising, they are prone to perilous crashes.
  • “Asset prices remain vulnerable to significant declines should investor risk sentiment deteriorate, progress on containing the virus disappoint, or the economic recovery stall,” the Fed said.
  • Ironically, the reason that the market has become susceptible to perilous crashes is, in large part, due to the Fed continuing to pursue its policies of money printing and near-zero interest rates.
  • The report shows that the Fed is fully aware of the very high risk high wire act that the Fed is pursuing.
  • The momo and meme crowds are oblivious to the risk that the Fed itself is now admitting.
  • Prudent investors are asking, “Why is the Fed pursuing such a high risk policy?”  For those interested in protecting the wealth they have accumulated and learning the next level of information, we have prepared a podcast titled ‘The dirty secret of the president and the  Fed chair you need to know.’  The podcast will be available soon to the Arora Ambassador Club members.

Producer Price Index

PPI came at 0.6% vs. 0.6% consensus.

Core PPI came at 0.4% vs. 0.4% consensus.

Put Call Ratio Crashing

The put call ratio is crashing.  This is one of the factors that goes into our proprietary sentiment measurement.  Sentiment is in the extreme positive.

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 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 $1829, silver futures are at $24.44, and oil futures are $82.43.

& 500 futures resistance levels are 4713 and 4900: support levels are 4600, 4460, and 4400.

 futures are down 37 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, 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, 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

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

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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