By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Recency Bias
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 the drop on omicron mutation. This is truly a Frankenstein mutation and caused fear among investors.
- The chart shows that the volume was high during the drop even on a shortened trading day. This indicates there are a large number of investors in this market who do not have conviction in this market continuing to go up. In spite of bullishness among the momo and meme crowds, such investors sell at the first sign of trouble to safeguard their assets.
- Recency bias means investors acting based on recent events and ignoring the long history and failing to objectively analyze what may come ahead.
- Over the weekend, the meme crowd encouraged everyone to buy the dip. Their lengthy discussions come down to one sentence — stonks always go up. After all, they started investing near the bottom last year and all they have seen are stocks going up.
- The momo crowd gurus are out in full force proclaiming that the dip should be bought. Their reasoning can be summed up in one sentence — stocks went up on delta, and for this reason, they will go up on omicron.
- Nobody is talking about the following differences:
- Valuations are much higher now.
- Inflation is running much higher.
- Biden will face opposition if he tries to recklessly borrow as he has done in the past.
- The Fed may not want to recklessly print money as they have done in the past.
Powell And Yellen
The hope among investors is that Powell and Yellen will come to the rescue of the stock market. Both are testifying in front of Congress on Tuesday. The testimony will give an opportunity for politicians and both Powell and Yellen to prop up the market.
Volatility
Prudent investors need to keep in mind that not enough is known yet about omicron. It may turn out to be nothing or a big deal. Here are the positive points so far:
- There is a report from South Africa that infections are mild so far.
- MRNA says they will have a vaccine in early 2022.
- PFE says it can make a new vaccine in 95 days.
- PFE says that it has confidence that its antiviral will be effective because it does not target the spike protein.
Here are the negative points so far:
- In South Africa, omicron is out-performing delta.
- It appears that the virus started spreading in late September. The efforts to contain it may not be very successful.
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 🔒.
Gold
The momo crowd is 🔒 gold in the early trade. Smart money is🔒.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒.
For longer-term, please see oil ratings.
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 $1791, silver futures are at $23.07, and oil futures are at $72.47.
S&P 500 futures resistance levels are 4713, 4770, and 4900: support levels are 4600, 4460, and 4400.
DJIA futures are up 326 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, 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.
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.
