By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Permabears Having A Field Day
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:
- Broadly speaking, stock market analysts belong in one of four categories.
- Permabears – they are having a field day with fearmongering. They have been wrong for years. Many have missed a 700% move in the market.
- Permabulls – they were having a field day until the calendar turned to 2022.
- Flip floppers – they turn very bearish when the market starts going down and turn very bullish when the market starts going up. They always have arguments to justify whichever way the market goes. Financial television channels love them and promote them. The reason is that they tap into the emotions of the masses.
- The real analysts – They are few and far between. They have proven models based on probabilities.
- During this period of market turbulence, keep front and center Arora’s Second and Third Laws of Investing and Trading.
- The Second Law: Nobody knows with certainty what is going to happen next in the markets.
- The Third Law: Making investing and trading decisions based on probabilities is the only realistic and profitable approach.
- The chart shows that SPY is above the support zone and close to the first band of the resistance zone.
- Here is the key question: Will the market break above the first resistance zone shown on the chart or will it break below the low shown on the chart in the very, very short term? The probability of the former is 60%. The probability of the latter is 30%. There is a 10% probability of a range bound market in the near term.
- Here is what to watch.
- Technical – the character of the first rally and subsequent pullback. This is the most important thing to watch in the short term.
- Fundamentals – watch earnings. 109 S&P 500 companies will report earnings this week.
- Macro – jobs report on Friday. Also watch statements by Fed officials.
- Our long term call has been that this stock market is in a bubble, and the bubble is likely to get bigger. More data is needed to change the call.
- For those who want the next level information, a podcast titled “Market Turbulence: How to Navigate” is live in the Arora Ambassador Club.
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
Houthis fired another missile on the UAE. The Israeli President was visiting the UAE on a historic visit. The missile was intercepted. No damage was caused. However, the incident is running up oil.
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒 in the early trade.
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 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 $1793, silver futures are at $22.48, and oil futures are $87.40.
S&P 500 futures resistance levels are 4460, 4600, and 4713: support levels are 4400, 4318, and 4200.
DJIA futures are down 137 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.
