By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
China Opportunity
Please click here for a chart of China Large-Cap ETF FXI.
Note the following:
- Protests are erupting all across China against the zero-COVID policy. Some protestors are calling for the resignation of President Xi.
- The China Communist Party (CCP) tightly controls the public and such protests against the zero-COVID policy are unprecedented.
- Nobody should be under the delusion that CCP will not crush the protests by force if they spread. Remember Tiananmen Square – in 1989 CCP sent the People’s Liberation Army with tanks to fire at protestors in Tiananmen Square in the heart of Beijing, killing thousands.
- The chart shows that the Hong Kong market bottomed for the short term right after the pressure from foreign money selling lifted.
- The chart shows when the foreign money exodus from Hong Kong stocks occurred. Foreign money was exiting China on the prospect of China invading Taiwan.
- The chart shows a 30% gain in Hong Kong stocks in two weeks on slight easing of COVID restrictions.
- The large gain occurred on domestic buying.
- Imagine how big the gain will be if China decides to exit its zero-COVID policy. Gains of about 60% or higher from the lows in a very short time are probable.
- In a scenario where protests spread and are crushed, the Chinese stock market will likely go down and provide a buying opportunity.
- In another scenario, a disorderly exit from the zero-COVID policy may also make the Chinese market go down and provide a buying opportunity.
- Of course, buying Chinese stocks is not for the faint of heart due to the Taiwan risk. Keep in mind that there is Taiwan risk in popular stocks such as Apple (AAPL), Tesla (TSLA), NVIDIA (NVDA), Nike (NKE), Starbucks (SBUX). Many of the popular ETFs are not immune to the Taiwan risk.
- If there is an opportunity to buy, balancing the risk and rewards, the buy zone will be published in ZYX Emerging.
- Those interested in this trade may consider listening to the podcast titled “Prudent Investors: Keep A Close Eye On China And Taiwan.”
Powell
Powell will be speaking on Wednesday. Powell is expected to say that the Fed will likely slow the pace of rate hikes. Expect momo gurus to start twisting what Powell is likely to say to run up the stock market before Powell’s speech.
Yield Curves
Yield curves keep on steepening. This is increasing the probability of a recession. However, Wall Street’s earnings estimates are based on solid economic growth and no recession.
Economic Data
There is significant, market moving, economic data ahead this week. The most notable is the jobs report on Friday.
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 the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see gold and silver ratings.
Oil
Oil is seeing 🔒 on China concerns.
The momo crowd is 🔒 in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin bulls are encouraged that bitcoin held up over the weekend. Bitcoin is trading over $16,000 as of this writing.
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 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 $1750, silver futures are at $21.47, and oil futures are at $74.11.
S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 3950, 3860, and 3770.
DJIA futures are down 227 points.
Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, 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 band 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.
