By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Extremely Positive
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:
- The chart shows that the stock market has reached the low band of the top resistance zone.
- RSI on the chart shows that as overbought as the stock market is, there is room for the stock market to run higher.
- The stock market always has a lot of crosscurrents. A new negative crosscurrent has developed. Sentiment has very quickly become extremely positive. As we have been sharing with you, at extremely positive, sentiment is a contrary indicator. In plain English, sentiment at extremely positive is a sell signal. Here are the key points:
- No one should act based only on sentiment.
- Sentiment is an important indicator but only one of the many indicators that go into a comprehensive 360 degree analysis.
- Sentiment is not a precise timing indicator.
- If the stock market pulls back, sentiment may also pull back, and thus negate any negative implications.
- Market mechanics continue to be on the positive side.
- Today is quadruple witching. In quadruple witching, stock index futures, futures options, stock options, and single stock futures expire.
- Quadruple witching can cause volatility.
- Over $5T notional value worth of options are expiring today.
- Related to options, depending upon how quadruple witching ends, there is a high probability of a market maker gamma squeeze. If a gamma squeeze starts, this market mechanic can take the market higher than you would think. To learn more about a market maker gamma squeeze, listen to the podcast titled “Market Mechanics: Impact Of Dealers’ Gamma Position Change On The Stock Market.” The podcast is available in Arora Ambassador Club.
- New York Fed President John Williams is trying to tactfully walk back Powell’s dovishness. So far, the stock market does not like what Williams has to say. Williams is also deemphasizing the dot plot. Williams says the rate cut question is not the main question before the Fed.
- The market is making many historic records.
- In a historic record, 44% of stocks in S&P 500 are overbought.
- In a historic record, small caps went from a new low to a new high in 48 calendar days.
- Due to the unprecedented nature of what is happening, be extra alert. The protection band may need to be changed quickly.
- As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band.
Magnificent Seven Money Flows
In the early trade, money flows are like a yoyo in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).
In the early trade, money flows are mixed in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).
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 *** 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 *** in oil in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) is range bound.
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 $2046, silver futures are at $24.27, and oil futures are at $72.17.
S&P 500 futures are trading at 4774 as of this writing. S&P 500 futures resistance levels are 4826, 4918, and 5020: support levels are 4713,4600, and 4460.
DJIA futures are down 33 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 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.
Traditional 60/40 Portfolio
Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.
Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of seven year duration or less. Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.
To take a free 30-day trial to paid services to gain access to more opportunities, please click here.
This post was just published on ZYX Buy Change Alert.
Markets can generate substantial wealth for knowledgeable investors. NOW YOU TOO CAN ALSO SPECTACULARLY SUCCEED AT MEETING YOUR GOALS WITH THE HELP OF THE ARORA REPORT. You are receiving less than 2% of the content from our paid services. …TO RECEIVE REMAINING 98% INCLUDING MANY ATTRACTIVE INVESTMENT OPPORTUNITIES, TAKE A FREE
TRIAL TO PAID SERVICES.
Please click here to take advantage of a FREE 30 day trial.
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.
