WALL STREET POSITIONING FOR SANTA CLAUSE STOCK MARKET RALLY

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By Nigam Arora & Dr. Natasha Arora

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

Positioning

Please click here for a chart of  Nasdaq 100 ETF (QQQ).

Note the following:

  • It is important for investors to pay attention to Wall Street’s positioning.  It is the positioning that often, in large part, determines the reaction to news.
  • Wall Street is positioning for a Santa Clause rally, especially in tech stocks.
  • The chart shows that QQQ has pulled back into the support zone.
  • The chart shows that RSI is oversold.  Oversold markets tend to bounce.
  • It is a seasonally positive period.
  • There are several hurdles in the way of a potential rally.
    • The news on omicron and delta.
    • Economic data may not be supportive. Most notable is CPI that will be released on December 10th.  The consensus is 0.6% or an annualized inflation rate of 7.2%.  Paradoxically, expectations for inflation are so high that if the data comes better than the consensus, it can spark a big rally in the stock market.
    • The Fed will meet on December 14 – 15.  Typically the momo crowd buys ahead of the Fed meeting in anticipation of the Fed continuing to print money.  However, this time is different.  Powell has indicated that the Fed may accelerate taper.  If the Fed is more hawkish than expected, expect the market to tumble. On the other hand, if the Fed does not accelerate taper, expect a vicious rally to the upside.
    • Smart money is shifting from expensive stocks to less expensive stocks.  However, the momo crowd mostly likes to buy expensive stocks.
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Bitcoin

Bitcoin crashed on Saturday apparently on forced selling on margin calls.  Since then bitcoin has been recovering but is still below $50,000.

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 🔒.  Smart money is 🔒.

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

Oil

Saudia Arabia is set to increase prices for the U. S. and Asia.

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 up and bonds are ticking down.

The dollar is stronger.

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 $1781, silver futures are at $22.32, and oil futures are at $68.03.

S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.

DJIA futures are up 276 points.

Protection Bands and What To Do Now?

It is important for investors to look ahead and not in the rearview mirror.

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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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Picture of 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.

Picture of 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.

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