By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Momo Buys Stocks
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:
- Russia is retaliating with apparent plans for heavier use of military force.
- As the news from Ukraine gets worse, momo is getting more aggressive in buying stocks.
- The thinking is that the Russian situation will make the Fed dovish.
- Early this morning, futures were down significantly. As the morning has progressed, momo buying has reduced the drop.
- The chart shows that the market is hanging near the top band of the support / resistance zone.
- The chart shows the market is hanging in above the January 24th low. January 24th low occurred on Fed fears and before the Ukraine crisis. This indicates that a large segment of market participants are buying believing the Ukraine situation is a buying opportunity. For those interested in the next level of information, listen to the podcast titled War – Stocks, Bonds, Gold, Oil, and Bitcoin.
- President Biden’s State of the Union speech is ahead. The reports are that originally the speech was focused on the economy but now a call for unity on Ukraine has been added. Often State of the Union does have some market-moving elements.
Flaws In Bitcoin Move Thesis
In yesterday’s Morning Capsule we wrote,
Bitcoin is seeing buying on the speculation that Russia will use more cryptocurrencies after the new sanctions.
Since the Morning Capsule, this narrative has taken hold and there is aggressive buying in bitcoin and other cryptos. However, the thesis behind bitcoin’s move has several serious flaws.
- The U. S. government has several ways to stop Russia from using bitcoin. It is still unknown if Biden will choose to do so.
- If the U. S. stops Russia from using cryptos, bitcoin will come crashing down.
- Russia needs to transact billions of dollars every day. The total bitcoin market, so far, is too small to permit the kind of volume that Russia needs.
- Bitcoin trading is too thin to accommodate even a small fraction of Russian transactions.
- Most exchanges limit bitcoin – ruble pair transactions to be less than $200,000.
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 🔒 gold in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see gold and silver ratings.
Oil
A very complex OPEC+ meeting is ahead.
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Markets
Our very, very short-term early stock market indicator is 🔒 as the market will move based on news and rumors. 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 stronger.
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 $1918, silver futures are at $24.76, and oil futures are $101.15.
S&P 500 futures resistance levels are 4400, 4460 and 4600: support levels are 4318, 4200 and 4000.
DJIA futures are down 125 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.
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This post was just published on ZYX Buy Change Alert.
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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.
