By Nigam Arora & Dr. Natasha Arora
Editors Note: Interim Capsule was published after Powell’s speech. The Morning Capsule was published before the market open and before Powell’s speech. Read the Morning Capsule first for the background and then the Interim Capsule. This post is the Morning Capsule. Interim Capsule is in a separate follow-up post.
To gain an edge, this is what you need to know today.
Wait For Powell
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:
- Investors are eagerly awaiting Powell’s speech. Powell will speak at 10:00 am ET at Jackson Hole. For the first time, the speech will be live streamed.
- As we had predicted in yesterday’s Morning Capsule, the chart shows that the momo crowd bought ahead of the speech on hope strategy.
- The chart shows a micro support zone.
- This morning, stock futures were pulling back but significant buying came in on new economic data. Here is the new economic data:
- PCE Prices – Core came at 0.1% vs. 0.3% consensus.
- PCE Prices came at -0.1% vs. +0.1% consensus.
- Personal Income came at 0.2% vs. 0.6% consensus.
- Personal Spending came at -0.1% vs. +0.4% consensus.
- The sum total of the foregoing is that inflation has come down at the same time as both personal income and spending have come down. This adds support for the Fed to not be too aggressive.
- From yesterday’s Afternoon Capsule,
In theory, if Powell is dovish, the magnet for the market on the upside is S&P 500 level of 4400. If Powell is hawkish, the magnet for the downside is S&P 500 level of 3850 with some support at 4000. S&P 500 is trading at 4172 as of this writing.
In practice, if Powell is hawkish, expect momo gurus to come up with a narrative to twist what Powell says to make it appear bullish for the stock market to persuade their followers to buy stocks; expect momo crowd to follow by aggressively buying stocks. If smart money sells aggressively, only then the market will go down if Powell is hawkish.
- Please stay alert as there may be a need to take some actions after Powell’s speech.
Breakthrough China Deal
The US and China have reached a breakthrough deal for inspection of audits of Chinese companies listed in the US.
From a post published yesterday in ZYX Emerging,
Breakthrough
After a decade of talks, there appears to be a breakthrough with China on audit inspections.
The US has been threatening to delist Chinese companies. US requires companies and their auditors to make available financial audits for inspection by the Public Company Accounting and Oversight Board every three years.
There has been an impasse with China because China does not allow foreign regulators to inspect audits of Chinese companies. China has contended that this policy is to protect state secrets.
Under a potential deal, American regulators would travel to Hong Kong to inspect the audits.
Chinese internet stocks have been rallying on the potential deal.
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 🔒 in 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 and is beginning to see aggressive buying as of this writing along with speculative stocks.
Markets
Our very, very short-term early stock market indicator is 🔒 because it will depend on what Powell says but expect the market to open 🔒. 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 $1760, silver futures are at $19.20, and oil futures are at $92.83.
S&P 500 futures resistance levels are 4318, 4400, and 4460: support levels are 4000, 3950, and 3860.
DJIA futures are up 143 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.
