By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Reduce Cash And Hedges
Only those who understand the following may consider reducing cash and hedges.
- These changes may need to be reversed quickly, and there may be a whipsaw.
- The Fed’s statement and Powell’s press conference are ahead tomorrow. These have the potential to further propel the rally or crush the rally.
- Wall Street earnings estimates are still too high.
- The new year may see selling.
Please see the “Protection Band And What To Do Now” section below. Make adjustments according to personal risk preference.
Inflation Cools
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:
- CPI data shows inflation has cooled. Here are the details:
- CPI came at 0.1% vs. 0.3% consensus.
- Core CPI came at 0.2% vs. 0.3% consensus.
- The chart shows that the market has moved into the support/resistance zone. There is technical resistance ahead.
- Seasonality is positive.
- As the day progresses, RSI is likely to be on a buy signal.
- Expect momo gurus to come up with narratives to start pushing the market towards S&P 500 levels of 4400 – 4500.
- In the early trade, buying is very aggressive in speculative and junk stocks.
- If the earnings in January disappoint, there is a significant downside to this market. Considering the economic conditions, the market is not inexpensive. There is not the valuation support that we would like to aggressively buy stocks.
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
Gold is rallying on a weaker dollar.
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
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 is being bought along with speculative stocks.
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 weaker.
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 $1823, silver futures are at $24.03, and oil futures are at $74.77.
S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.
DJIA futures are up 748 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 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.
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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.
