GLOBAL CURRENCY BREAKDOWN ACCELERATES – CREATING NEW OPPORTUNITIES

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By Nigam Arora & Dr. Natasha Arora

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

Global Currency Breakdown

Please click here for a chart of British pound futures (GBP_F).

Note the following:

  • Global currency breakdown is accelerating.  History shows that such events create great opportunities for investors.  
    • Investors need to be patient and not rush in just because the market is down.  It is important for investors to stay fully engaged.  Our experience has shown that investors who do not stay engaged miss out on the best opportunities.  
  • The chart shows the collapse in the British pound.
  • The collapse in the British pound started when the government announced the biggest tax cuts in 50 years.
    • Investors are worried that this large of a tax cut is like putting gasoline on the fire of inflation.
  • There is increasing talk of pound parity with the dollar.  Only days ago parity was unthinkable.  The kind of collapse you see on the chart is a characteristic of emerging markets but not of developed markets such as UK.
  • You may ask how is the government going to finance the tax cuts.  The answer of the government is to borrow.  This has spooked investors.
  • Intervention in the forex market is not a great option for the Bank of England because it does not have large forex reserves.
  • The chart shows that yesterday evening the pound fell under 1.04 to USD.
    • This is the lowest level of the British pound against the US dollar.
  • The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.
  • The chart shows that the VUD indicator was solid orange indicating net supply during the collapse.
  • The chart shows that the pound has rallied off of the lows on speculation that the Bank of England would be forced to raise interest rates in an emergency move by 2%.
  • We had previously shared with you that the Chinese currency yuan was reaching China’s red line.
    • China has stepped in to support the yuan.
    • Yuan is at the weakest level since the 2008 financial crisis.
    • Yuan declined about 2%, close to the trading limit.
  • There is a report that China has ordered state owned banks to buy stocks to prevent the stock market from falling.  
  • How is the momo crowd responding to this global currency upheaval?  The momo crowd is boldly stepping in and buying stocks.
    • This year, buying the dip and not selling the rip has consistently resulted in losses, but don’t tell that to the momo crowd.
      • 2022 is the worst year since the 1930’s for buying the dips in the stock market.
  • Investors should be on the lookout for several signs of capitulation before buying.  Please listen to the podcast titled “The Ten Secrets Of Epic Capitulation Riches.”
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Fed Speak

This week 12 of the 19 Fed officers are speaking.

  • Powell will speak twice.
  • All Fed officials are expected to repeat the very hawkish stance.  You would think that such a chorus of hawkish speeches would be negative for the stock market, but the momo crowd’s reality is very different.
  • For momo gurus, there will be 13 opportunities to twist the words of Fed officials to attempt to run the stock market higher.

Italy

Giorgia Meloni is likely to become Italy’s new prime minister.  She will be the most far-right prime minister since Mussolini.     

Investors need to carefully watch how her election impacts the situation in Europe.

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 🔒 in oil in the early trade.  Smart money is 🔒 in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Some gurus are predicting bitcoin has hit bottom.  As a result, bitcoin is slightly higher.

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.

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Interest rates are ticking up, and bonds are ticking down.

The dollar is range bound.

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 $1651, silver futures are at $18.82, and oil futures are at $78.90.

S&P 500 futures resistance levels are 3770, 3860 and 3950: support levels are 3630, 3600 and 3520.

DJIA futures are down 113 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 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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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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