By Nigam Arora & Dr. Natasha Arora

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

Hopes Of Rescue

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:

  • The Federal Open Market Committee (FOMC) is meeting today.
  • FOMC will announce its decision tomorrow at 2:00 pm ET followed by Powell press conference at 2:30 pm ET.
  • The chart shows Arora’s sell signal for a short term trade using inverse ETF SQQQ or short-selling QQQ.
  • The chart shows that the first target hit in four days.
  • The chart shows that the Arora signal was totally opposite of the infallible momo signal given by the momo crowd gurus.
  • The chart shows that on prior occasions, the market bounced after touching the lower band of the channel.  This is what made the momo crowd so confident.
  • When the momo’s gurus gave their infallible signal, we questioned that they were not thinking of the other side – what if the channel breaks.
  • The chart shows the channel broke and the momo’s gurus infallible signal was wrong.
  • Prudent investors take note that there is very important information about the momo crowd on display on the chart.  When they were proven wrong, instead of controlling the risk as professional investors do, they doubled up and continued to buy aggressively – hope springs eternal.
  • In a raging bull market, not controlling the risk works.  However, when the market turns, most momo accounts will be wiped out.
  • The chart shows that RSI is oversold indicating a potential bounce.
  • The chart shows heavy volume during the drop.
  • The chart shows a long wick on the red candle when the market dropped.  This also indicates a very very short-term potential bounce.
  • Here is the key question: ‘Will the bounce last?’  The answer depends on rumors about the Fed and the Fed’s decision tomorrow.

Housing Starts

Housing Starts came at 1.615M vs. 1.560M consensus.

Building permits came at 1.728M vs. 1.6M 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 🔒.

Gold

The momo crowd is 🔒 gold in the early trade.  Smart money is🔒.

For longer-term, please see gold and silver ratings.

Oil

The momo crowd is 🔒 oil in the early trade.  Smart money is 🔒.

For longer-term, please see oil ratings.

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 $1773, silver futures are at $22.55, and oil futures are at $70.72.

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

DJIA futures are up 206 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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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.