By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
The headline of the Morning Capsule on Monday said, ‘OVERSOLD BOUNCE’. That call from The Arora Report was proven spot on as the stock market went on to rally over 500 DJIA points.
Please click here to see the chart that was included with the call. The analysis with the call brought attention to oversold RSI.
What is next? It comes down to Powell’s testimony.
Powell Testimony
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- The chart shows that QQQ has moved above the breakout line.
- The chart shows that RSI is indecisive and can go either way.
- The market-moving event will be Powell’s testimony.
- Powell will be testifying at 2:00 pm ET before the House Select Subcommittee on the coronavirus crisis.
- Powell’s prepared text shows that Powell is holding the line that inflation will be transitory.
- It is an important reminder for investors that we are politically agnostic. Our sole job is to help investors. The point below is not about politics but is very significant for investors. Good investors set their politics aside.
- In Q&A, Republicans will likely attempt to trip Powell. Republicans have a great argument – Powell is enabling Democrats to borrow recklessly and spend excessively by artificially keeping interest rates low. Of course, Republicans have no credibility because they also borrow and spend excessively when they are in power; Republicans become against reckless borrowing and excessive spending only when they are not in power.
- How Powell handles the minefield will determine the direction of the stock market.
Bitcoin
Bitcoin is coming under pressure and has fallen below $30,000.
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🔒 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
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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 $1773, silver futures are at $25.76, and oil futures are $72.75.
S&P 500 futures resistance levels are 4318 and 4400: support levels are 4200, 4000, and 3950.
DJIA futures are up 31 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, on dips, 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, 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.
