To gain an edge, this is what you need to know today.
Interest Rate Rise
Please click here for a chart of bond ETF (TLT).
Note the following:
- At The Arora Report we are politically agnostic. Our sole job is to help investors. Being neutral allows us to clearly see the data without coloring with a bias. This is the reason we made the correct call of Trump election when Wall Street had universally anointed Hilary Clinton as the next president. By staying neutral, when Trump was elected and the stock market was falling due to Wall Street’s predictions of massive losses, our call was to buy aggressively. This turned out to be the right call. As Trump took the lead, gold was rocketing. Our call was to short sell gold right at the top. Gold fell about $200 in a very short time. The headline of a major business publication was, “Arora report creates ripples in the bullion market.”
- Trump supporters are encouraged because they believe Trump came out triumphant from coronavirus illness.
- Biden supporters are encouraged because the latest polls show that Biden is increasing his lead over Trump.
- Investors should remember that during the last election and during Brexit, polls were wrong. The Arora Report was one of the rare services that called Brexit correctly going against the polls.
- The most significant data point is shown on the chart.
- Bonds move inverse to interest rates.
- Interest rates are rising and thus bonds are falling.
- The chart shows a double top in bonds. In traditional technical analysis, this is a negative pattern.
- The chart shows that TLT gapped down.
- The chart shows that TLT broke down below the support.
- The breakdown in bonds is due to Wall Street increasingly calling a blue sweep.
- It is true that Trump has increased the national debt in a major way. We have been very critical of heavy borrowing. As we have written before, Biden will borrow even more than Trump and that is not good in the long term for investors and America.
- The breakdown in bonds shows that Wall Street is coming to the view we have been expressing for a while.
- What is the impact on the stock market? If the levitation in this stock market was not an artificial construct due to money printing and heavy borrowing, we would be giving a major sell signal for the stock market. However, the reality is that this stock market is an artificial construct. As interest rates start rising, due to potential heavy Biden borrowing, the Fed is likely to step in to buy bonds. Such Fed action will increase the demand for bonds and thus reduce the interest rates.
- Under these circumstances, at least for now, there is no change in our prior stance but investors need to stay alert. Please pay attention to ‘Protection Bands and What To Do Now?’
- In the short term, it is a positive for the stock market because the momo crowd is aggressively buying on the prospect of heavy Biden borrowing.
Home prices increased 5.9% year over year. This is the fastest rate in two years.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial) in the early trade. Smart money is 🔒.
Money is beginning to flow into gold on the prospect of Biden borrowing.
The momo crowd is 🔒 gold in the early trade. Smart money is🔒.
For longer term, please see gold and silver ratings.
The momo crowd is 🔒 in the early trade. Smart money is 🔒.
For longer term, please see oil ratings.
Our very, very short-term early stock market indicator is neutral but expects the market to open higher on momo buying. 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 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 $1923, silver futures are at $24.42, and oil futures are $40.66.
S&P 500 futures resistance levels are 3420, 3460 and 3520: support levels are 3390, 3320 and 3278.
DJIA futures are up 140 points.
Protection Bands and What To Do Now?
It is important for investors to look ahead and not in the rear view mirror.
Consider continuing to hold existing positions. Based on individual risk preference, consider holding 🔒 in cash or treasury bills or short term bond funds 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, 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.
This post was published on ZYX Buy Change Alert.
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