By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
ECB Stops Net Asset Purchases
Please click here for a chart of the European Central Bank (ECB) balance sheet.
Note the following:
- The chart shows that since the 2008 financial crisis the ECB balance sheet has dramatically risen.
- Investors need to worry not only about the Fed, but also about ECB and Bank of Japan.
- After its meeting, ECB has decided that it will stop net asset purchases as of July 1. In plain English, this means that ECB will no longer be printing money.
- ECB will raise its key interest rate by 25 basis points at its July meeting.
- ECB is open to raising interest rates in the future by higher amounts such as 50 basis points if inflation data deteriorates.
- ECB will make decisions based on medium term inflation outlook.
- As a reference point, inflation hit 8.1% in May in the euro area.
- ECB is revising its inflation projections upwards to 6.8% in 2022, falling to 3.5% in 2023, and 2.1% in 2024.
- The new growth projections are 2.8% in 2022, 2.1% in 2023, and 2.1% in 2024.
- Investors should carefully watch Italian bonds to see if the spread between Italian bonds and German bunds widens. If the spread significantly widens, that will be an additional risk for investors to be concerned about. Of course, we will be watching the spread for you at The Arora Report.
Jobless Claims
Initial claims came at 229K vs. 208K 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 🔒 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 is range bound.
Markets
Our very, very short-term early stock market indicator is 🔒 as the market direction will depend on how aggressive momo crowd 🔒 is ahead of CPI data tomorrow. 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 $1852, silver futures are at $21.98, and oil futures are $121.57.
S&P 500 futures resistance levels are 4200, 4318 and 4400: support levels are 4000, 3950 and 3860.
DJIA futures are down 96 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 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.
