By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Bulls Encouraged
Please click here for a chart of Dow Jones Industrial Average ETF Trust (DIA).
Note the following:
- The chart shows that the Dow Jones Industrial Average has gone straight up in the month of July.
- Strength is spreading from the magnificent seven to other large cap stocks in the Dow Jones Industrial Average. The magnificent seven stocks are Apple (AAPL), Amazon (AMZN), Alphabet (GOOG, GOOGL), Meta (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA).
- The trendline on the chart shows that the slope is steep. Historically, such a steep slope is not sustained.
- RSI on the chart shows that the market is very overbought.
- In The Arora Report analysis, the primary reason for strength in the Dow Jones Industrial Average is not the macro or the fundamentals but a rush to buy the laggards in the stock market.
- Yesterday, we shared with you in the Morning Capsule:
To date, about 20% of S&P 500 companies have reported earnings. These earnings are down about 9% from the prior year. As earnings have fallen, the stock market has gone up on PE expansion.
- This morning, the story on earnings is better beyond tech stocks.
- GM is raising its profit targets by at least $1B, and its second quarter earnings beat the consensus on pent up demand for large SUVs and pickups.
- GE is raising its guidance, and second quarter earnings are better than the consensus as pent up demand for travel increases sales of jet engines.
- Paint maker Sherwin-Williams (SHW) reported great earnings on strong demand for paint.
- The enthusiasm from a rally in the Chinese stock market is spilling over into the U.S. China is signaling stimulus to increase consumption and also for real estate.
- Investors are eagerly waiting for earnings from Microsoft (MSFT) and Alphabet (GOOG) that will be released after the market close.
- The FOMC meeting is starting today. The Fed will announce its rate decision tomorrow.
- Historically, the momo crowd buys ahead of the Fed.
- Sentiment continues to be very positive, bordering on extreme but has not yet reached extreme. We previously shared with you:
Going into the critical week, sentiment is very positive, bordering on extreme. When sentiment reaches extremely positive, it is a contrary signal. In plain English it means time to sell. As a reminder, sentiment is not a precise timing indicator. In general, you want to buy when sentiment is extremely negative, and take profits when sentiment is extremely positive.
- The Conference Board’s Consumer Confidence Index will be released at 10am ET and may be market moving. The consensus is 111.5.
- As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.
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 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 the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin continues to trade below $30,000.
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 up, and bonds are ticking down.
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 $1959, silver futures are at $24.71, and oil futures are at $78.57.
S&P 500 futures are trading at 4586 as of this writing. S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.
DJIA futures are down 3 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 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.
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.
Markets can generate substantial wealth for knowledgeable investors. NOW YOU TOO CAN ALSO SPECTACULARLY SUCCEED AT MEETING YOUR GOALS WITH THE HELP OF THE ARORA REPORT. You are receiving less than 2% of the content from our paid services. …TO RECEIVE REMAINING 98% INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES, TAKE A FREE
TRIAL TO PAID SERVICES.
Please click here to take advantage of a FREE 30 day trial.
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.
