By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Low Liquidity
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows that the stock market is consolidating in no man’s land in between zones marked as support/resistance zone and resistance zone.
- Momo gurus are pumping the narrative that there will be a sharp break to the upside from the consolidation.
- RSI on the chart shows the market is slightly over bought, but the pattern is that of a rally.
- This is a holiday week. Senior personnel have gone on vacation. Wall Street trading desks are being manned by junior personnel. This is leading to low liquidity.
- When liquidity is low, it is easy for the momo crowd to push stocks higher.
- Historically, leading into holidays, investors are in a good mood and buy stocks.
- Low liquidity and holiday cheer is overcoming concerns about China. COVID continues to spread in China. On Monday, there were 27,307 new cases compared to the previous record of 28,973 cases from the Shanghai outbreak in April.
- Hong Kong stock market had surged 24% on prospects of China easing its zero COVID policy. Now Hong Kong stocks are giving up some of the gains on fears that authorities will introduce stricter measures.
- Prudent investors need to keep in mind that the low liquidity also means that the stock market can easily be driven down by short sellers and hedge funds. It usually does not happen because short sellers and hedge fund managers also go on vacation. However, they tend to jump back in action if there is the slightest bit of negative news or rumors.
- Fed speak is ahead.
- Mester of Cleveland Fed speaks at 11am ET.
- George of Kansas City Fed speaks at 2:15pm ET.
- Bullard of St. Louis Fed speaks at 2:45pm ET.
- There is an auction of $35B of 7-year Treasury notes. The results will be reported at 1pm ET.
Holiday Schedule
Happy Thanksgiving to our members and their families. Due to the holiday, our offices will be running with reduced staffing starting this afternoon. If there are signals on existing positions or new ideas, they will continue to be published as appropriate. The next Capsule will be on Monday morning.
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
There are new reports that China is buying large quantities of gold to lessen dependence on the U.S. dollar. China is spooked by the success of U.S. sanctions against Russia. If China is planning on invading Taiwan, it makes sense that China would be buying large quantities of gold. Those who want to learn in depth, please listen to the podcast titled “Prudent Investors: Keep A Close Eye On China And Taiwan.”
The momo crowd is buying 🔒 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 🔒 oil in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin
There are contradictory reports about crypto broker Genesis considering filing bankruptcy. Genesis apparently needs $1B to continue operations.
Bitcoin was seeing selling yesterday on reports about Genesis. However, this morning whales are trying to run up 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 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 $1746, silver futures are at $21.12, and oil futures are at $81.73.
S&P 500 futures resistance levels are 4000, 4200, and 4318: support levels are 3950, 3860, and 3770.
DJIA futures are up 177 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 band 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 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.
