Raise Cash
Consider increasing cash on bounces. See ‘Protection Bands and What To Do Now?’ section below.
The Chart
Please click here for a chart of S&P 500 ETF (SPY).
Note the following:
- During the rally, the price never touched the trendline.
- There is another downward push this morning.
- The price did not stay above the breakout line for long.
Politicization Of Judiciary
After Ginsburg’s death, the judiciary in the United States may get politicized beyond an important threshold. This is a negative. Here are the key points:
- The U. S. has been able to borrow and print money without significant adverse consequences so far because the dollar is the reserve currency of the world.
- There are many factors that made the dollar the reserve currency of the world. In today’s world, where China, Russia and our own leaders are trying to dethrone the ‘King Dollar,’ politicization of judiciary will hurt the dollar. Under these circumstances, our system of government of three independent branches has given the world confidence in the dollar. Now the threshold of where our system gave the world confidence is likely to be crossed to the negative side.
- With focus on the Supreme Court, stimulus bill passage is unlikely. There are segments of our population that need help.
- If the election is disputed, politicization of the Supreme Court will make the resolution more difficult.
- The Supreme Court will hear challenge to Obamacare right after the election. The probability of the Supreme Court killing Obamacare has gone up. Obamacare has many flaws. However if Obamacare is killed, it will lead to millions of people, especially those who are sick and/or close to retirement not able to get the medical care they need and the number of medical related bankruptcies will explode.
- The focus of the election will shift from economic issues to judiciary. In the long run this is a big negative for the stock market.
- The country is already divided. The division will become more bitter sapping the strength of the U. S. as a nation.
Virus Fears
There is fear of another lockdown in the U. K. due to virus surge.
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Interest rates are ticking down and bonds are ticking up.
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 $1922, silver futures are at $26.12, and oil futures are $40.49.
S&P 500 futures resistance levels are 3278, 3320 and 3390: support levels are 3228, 3182 and 3155.
DJIA futures are down 574 points.
Protection Bands and What To Do Now?
It is important for investors to look ahead and not in the rear view 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.
This post was published on ZYX Buy Change Alert.
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