By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Stocks Recover
Please click here for a chart of S&P 500 futures (ES_F).
Note the following:
- The chart shows about a 2% drop in stock futures on Russia’s move.
- Russia has recognized two separatist regions of Ukraine.
- Russia is sending peacekeepers to these regions. The U. S. says that the peacekeepers will be Russian soldiers.
- The media is promoting scary headlines but is not telling you the reality.
- For a long time, the government of Ukraine has had no control over these regions.
- These regions have been self-governing with de facto support from Moscow.
- Russian fighters have been in these regions for years forcing Ukraine to give up control.
- What Russia has done now is simply formal recognition of the reality on the ground for years.
- A new concern is that in a fiery speech, Putin appears to lay Russia’s claim on the entire country of Ukraine.
- Those who want the next level information on how stocks, bonds, gold, oil, and bitcoin react to war may want to carefully listen to the podcast titled War: Stocks, Bonds, Gold, Oil, and Bitcoin. The podcast is now live. As an example, during World War II, DJIA went up about 50%.
- Ukraine and Russia are relatively small economies. This Russian move by itself will have an immaterial impact on the world economy and the stock markets. The risk to the world economy and the stock markets is from the sanctions that the U. S. and its allies will impose.
- The U. S. has threatened to impose the most severe sanctions. However, in The Arora Report’s analysis, the U. S. may consider not imposing the most severe sanctions at this time because imposing the most severe sanctions at this time will remove the deterrent for Russia to launch a full-scale invasion.
- The chart shows the market making a higher low.
- The chart shows the speculation that Russia would not mount a full-scale invasion and a strong rally on this speculation.
- Here are the probabilities in The Arora Report analysis.
- Full-scale invasion 25%.
- A diplomatic solution found 25%.
- Small incursions 50%.
- Here is what the stock market may do:
- In the event of a full-scale invasion, the highest probability scenario is up to a 28% drop from the high.
- In the event of a diplomatic solution, a sharp 7 – 12% rally.
- In the event of small incursions, it will come down to the Fed and the nature of the sanctions imposed.
- The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.
- As of this writing, the VUD indicator shows that there is strong net demand for stocks.
Fed’s Hands Tied
Depending upon the nature of the sanctions, the Russian situation will tie the Fed’s hands. If the Fed becomes less hawkish, the stock market will rally in the near term. However, it will be negative for the longer term.
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
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 bulls have been contending that bitcoin is a hedge against geopolitical uncertainty. This is not proving to be the case. Bitcoin fell on the Russia news. Bitcoin is acting more like a risk asset and not as a hedge.
Markets
Our very, very short-term early stock market indicator is 🔒 as the market will move based on the nature of the sanctions and further moves from Russia. 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 $1905, silver futures are at $24.29, and oil futures are at $93.11.
S&P 500 futures resistance levels are 4400, 4460 and 4600: support levels are 4318, 4200 and 4000.
DJIA futures are down 107 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 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, 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.
