INVESTORS PAY ATTENTION: GURUS’ WISDOM SHATTERED

By Nigam Arora & Dr. Natasha Arora

The Arora Report Chart

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

Gurus’ Wisdom Shattered

Please click here for a chart of gold ETF (GLD).

Note the following:

  • The chart compares gold to bitcoin, bonds and the dollar index.
  • Over the last few years, a majority of gurus have been stating the following wisdom.
    • Gold was obsolete.
    • Gold was replaced by bitcoin.
    • Gold was no longer a hedge against inflation.
    • Bitcoin was the new hedge against inflation.
    • The stock market would continue to go up.
  • If you were to ignore the gurus over the last couple of years, the following conventional wisdom has been true.
    • Gold falls when interest rates go up. Bonds fall when interest rates go up.
    • Gold falls when the dollar goes up.
  • The chart shows that bonds have fallen as interest rates have risen.
  • The chart shows the dollar has risen.
  • The chart shows gold has been rising.
  • Based on the conventional long standing wisdom, gold should have fallen as the dollar has gone up and bonds have fallen.
    • The chart shows that instead of falling, gold has been rising.
    • Based on most conventional models, gold should have fallen to $1,600 – $1,700 range.
    • Gold is now trading around $2,000.
  • It is no secret that the stock market has been falling.
  • The chart shows that bitcoin has been very volatile and has fallen.
    • The new wisdom has been that bitcoin would go much higher if there was inflation and if the stock market fell.
  • The sum total of the foregoing is that both the long standing conventional wisdom and the new found wisdom of the gurus are being shattered.
  • For those who want the next-level information, an in depth podcast titled Gold: A Remarkable Reaction to Interest Rates is available.

China

China GDP is topping expectations. GDP came at 4.8% vs. 4.4% consensus.

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 🔒 stocks 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

There is interruption in oil production in Libya

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 has fallen below $40,000.  Selling in speculative aggressive stocks is leading to selling in bitcoin.

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 $1997, silver futures are at $26.35, and oil futures are $106.90.

S&P 500 futures resistance levels are 4400, 4460 and 4600: support levels are 4318, 4200 and 4000.

 futures are down 25 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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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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