To gain an edge, this is what you need to know today.
Raise Cash And Hedges
Investors should always give priority to return of capital over return on capital. It is time to raise cash and hedges. Please scroll down to ‘Protection Bands and What To Do Now?’ section.
A New Year Rarity
Please click here for a chart of S&P 500 ETF (SPY) which represents stock market benchmark (SPX).
Note the following:
- The chart shows a New Year rarity.
- The chart shows that on the first trading day of the year, stocks opened higher but finished over 1% lower.
- The foregoing has happened only twice since 1983 — in 2000 and 2008.
- If the year 2021 turns out to be like the year 2000, the momo crowd of today will lose 90 to 95% of their portfolio value.
- If the year 2021 turns out to be like the year 2008, the momo crowd of today will lose 80 to 85% of their portfolio value.
- It is good to be aware but there is no reason to panic at this time. The reason is that unlike 2000 and 2008, interest rates are near zero, the Fed is excessively printing money and the government is excessively borrowing. Contrary to many opinions, our call is that the behavior of the government has caused this stock market bubble. The probability is fairly high that the bubble will become bigger.
- The chart shows higher volume on stock market decline. This is a negative.
- The chart shows RSI failed to get overbought before declining. This is a negative.
Watch Marijuana Stocks
Please start out by reading yesterday’s Morning Capsule about the Georgia election. If Democrats win, marijuana stocks will likely fly.
We will shortly publish an update to the Marijuana Model Portfolio in ZYX Buy with 12 stocks. We will also publish two ETFs to consider in ZYX Global Multi Asset Allocation.
Objection To Certification
January 6th is a big day. Trump is mounting a big campaign to object to the certification of Biden as the next president.
The prevailing wisdom is that this is a futile effort. However, keep in mind that Trump has always taken pride in surprising his opponents. Could Trump have a surprise up his sleeve this time that may significantly move the stock market and gold?
Bitcoin To $146,000
After being a fringe, the establishment’s jumping on the Bitcoin bandwagon is now complete. The countries most respected bank is projecting a long-term target for Bitcoin of $146,000.
ISM Manufacturing Index will be released at 10:00 am ET. This number is often a market moving event.
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.
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 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 $1953, silver futures are at $27.65, and oil futures are $48.75.
S&P 500 futures resistance levels are 3800 and 4000: support levels are 3630, 3600 and 3520.
DJIA futures are down 41 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.
This post was just published on ZYX Buy Change Alert.
New Year Sale
Join your fellow investors who are taking advantage of the New Year sale in large numbers. Please click on the link below for more details.
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