POSITIONING AND RETAIL EARNINGS GENERATING OPTIMISM; OPPORTUNITIES AHEAD IN THAILAND, TURKEY, AND INDIA

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By Nigam Arora & Dr. Natasha Arora

To gain an edge, this is what you need to know today.

Retail Earnings And Positioning

Please click here for a chart of Walmart stock (WMT).

Note the following:

  • The Morning Capsule is about the big picture, not an individual stock.  The chart of Walmart stock is being used to illustrate the point.
  • The chart shows that Walmart stock is in the resistance zone.
  • The pattern shown on the chart often leads to a breakout.
  • Earnings from important retailers are ahead this week:
    • Home Depot (HD) earnings are on Tuesday.
    • Target (TGT) and The TJX Companies (TJX) earnings are on Wednesday.
    • Walmart (WMT) and Ross Stores (ROST) earnings are on Thursday.
    • Lowe’s (LOW) earnings are on Tuesday next week.
  • Positioning outside the momo crowd is for a pullback in the stock market.  Paradoxically, if retail earnings are good and the stock market starts moving higher, negative positioning will provide fuel to power the stock market to break above 4200 in S&P 500.  This is the bull case.
  • The bearish case is that the stock market is overvalued and there is no valuation support for the stock market to go higher.
  • Further, the bears point out that without the artificial intelligence (AI) frenzy, S&P 500 year to date would have been down 2% instead of up 8%.  Investors should develop a deeper understanding of the AI frenzy.  We are working on a podcast on the subject for those who want next-level information on AI.  The podcast will be available in Arora Ambassador Club.
  • An actionable item from the foregoing is the protection band, which strikes the proper balance between various crosscurrents.

Thailand

In the Thailand election, pro-democracy parties have won big.  The top two pro-democracy parties together are projected to win 292 seats out of 500 seats in the lower house.  This is a challenge to the military junta that rules Thailand.

However, in Thailand, it is not as simple as the election winner forming a government.  The constitution requires approval of the upper house.  The upper house is dominated by supporters of the military.

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Significant uncertainty is ahead on the political front.  However, this uncertainty may bring a major buying opportunity in Thailand.  Thailand has been continuously covered for 16 years in ZYX Emerging.

Turkey

After ruling Turkey with an iron fist, President Erdogan appears to not have won over 50% of the votes in the election.  A runoff election is likely in two weeks’ time.

There is significant uncertainty ahead.  The uncertainty may bring a major buying opportunity in Turkey. Turkey has been continuously covered for 16 years in ZYX Emerging.

India

Prime Minister Modi’s party BJP has lost the election in the southern state of Karnataka Bengaluru, the capital of Karnataka is the tech hub of India.  The election results have implications for the next general election.  As the uncertainty rises, there may be a dip in the Indian stock market.  Such a dip will be a buying opportunity.  India has been continuously covered for 16 years in ZYX Emerging.

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

There is 🔒 in silver this morning.

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 🔒 oil in the early trade.  Smart money is 🔒 in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin bulls are emboldened in that whales supported bitcoin over the weekend.  The speculation was that without whales’ support over the weekend, bitcoin could have fallen below $25,000.

Bitcoin has moved over $27,000 as the feared selloff over the weekend did not happen.

Markets

Our very, very short-term early stock market indicator is 🔒 but expect the stock market to open 🔒.  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.

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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 $2021, silver futures are at $24.29, and oil futures are at $70.57.

S&P 500 futures are trading at 4144  as of this writing.  S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are up 34 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.

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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 five 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.

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This post was just published on ZYX Buy Change Alert.

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Nigam Arora

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

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.

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