By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
A Dramatic Change
Note the following:
- As omicron spreads like wildfire, investors and Wall Street continue to suffer from the recency bias. The recency bias means that the road ahead will be the same as the road behind.
- For investors, there is a dramatic change in facts.
- Analysts are not fully incorporating the new facts into their analysis due to the recency bias.
- Senator Manchin has stood up to President Biden and the entire Democrat establishment. Senator Manchin has said that he cannot support the Build Back Better bill.
- Senator Manchin’s action means that the expected very high increase in government spending will not occur.
- The preliminary estimate is that the first quarter of 2022 GDP will be reduced from 3% to 2% growth.
- Expect a similar reduction in GDP growth for the next several years.
- This may help calm down inflation.
- The stock market has risen, in large part, due to government spending and money printing. Now the anticipated increase in government spending may not occur.
- The Fed is tapering.
- As omicron spreads, it is important to note that most of the vaccines used in Asia are not effective against omicron. Expect more supply chain disruptions. This will increase inflation.
- The foregoing shows that the facts have dramatically changed but investors have not yet come to grips with these changes.
- There are both positive and negative scenarios for the stock market. We have very smart subscribers. Over the weekend, a large number of you were writing asking for a podcast with next-level information. A podcast containing the next-level information titled ‘A Dramatic Change In Facts: The New Virus Wave’ is now live to help investors who seek the next-level information. In view of the importance of omicron, we also received a large number of requests from investors and money managers to re-open the waitlist to join the Arora Ambassador Club. We have listened and the waitlist is being re-opened. We will do a separate post on the subject.
- The chart shows Arora call to raise hedges.
- The chart shows that the Fed rally has now completely failed.
- The chart shows that QQQ is now in the support zone.
- Unlike QQQ, S&P 500 ETF (SPY) is still well above the top support zone.
- No technical damage is done until the market falls below the support zone.
- Bears are contending that the market is forming a triple top as shown on the chart. This is a negative formation.
- RSI on the chart foreshadowed this decline in the market.
- RSI is now oversold. Oversold markets tend to bounce.
- Bulls are pointing to positive seasonality and are buying the dip this morning in anticipation of a Santa Claus rally.
Momo Crowd And Smart Money In Stocks
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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🔒 oil in the early trade. Smart money is 🔒.
For longer-term, please see oil ratings.
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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 $1797, silver futures are at $22.21, and oil futures are at $67.71.
S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.
DJIA futures are down 378 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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