To gain an edge, this is what you need to know today.
Consider raising cash. Depending upon your personal preference, it is appropriate to take some partial profits especially on up spikes. For details, please see the ‘Protection Bands and What To Do Now?’ section below.
Fed Was Wrong
Note the following:
- Earlier this week we wrote:
The seasonality is positive this week but will turn negative next week.
The third quarter is historically the weakest quarter. Markets tend to dip from August to October.
The chart shows that RSI is very overbought and now flattening. This indicates that a pullback may be coming.
- The chart shows Arora’s call to raise cash today.
- Note from the chart that the timing of the last three Arora sell signals was as perfect as it gets in real life.
- Note from the chart that the timing of the last two buy signals was also as perfect as it gets in real life. These signals follow hundreds of spot-on signals over a very long period in both bull and bear markets.
- The chart shows that RSI has turned down.
- The chart shows that the rally has been on low volume. As we have previously shared with you, low volume rallies indicate a lack of conviction.
- It is important for investors to keep in mind Arora’s Second Law of Investing: Nobody knows with certainty what is going to happen next in the markets.
- We have been warning you that the momo crowd as well as a large number of institutional investors have been putting blind faith in the Fed and Biden.
- We have also been warning you that those who have studied history know that the Fed has often been wrong especially at critical junctions.
- We shared with you the details of the Fed minutes yesterday.
- The Fed minutes show that Fed officials have been surprised by the surge in prices of goods and services.
- The Fed minutes indicate that the Fed may be forced to give up its intransigence of recklessly printing money on the pretext of helping those who are on the low end of the economic totem pole.
- If the Fed becomes less accommodative, it may cause a dip in the stock market as less air will be pumped into the stock market bubble.
- When markets get overbought, they become vulnerable to a pullback. On the days the market is going up, talking heads have all sorts of explanations for the market going up. On the days the market drops, the same talking heads have, after the fact, all sorts of explanations for the market drop. Today is no different.
Initial Jobless Claims came at 373K vs. 350K consensus. This is a leading indicator and carries heavy weight in our models.
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 🔒.
The momo crowd is 🔒 gold in the early trade. Smart money is 🔒.
For longer-term, please see gold and silver ratings.
API reported a draw of 7.983M barrels vs. consensus of a draw of 6.2M barrels.
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒.
For longer-term, please see oil ratings.
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 $1816, silver futures are at $26.16, and oil futures are $71.90.
S&P 500 futures resistance levels are 4318, 4400 and 4460: support levels are 4200, 4000 and 3950.
DJIA futures are down 481 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 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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