By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
NASDAQ Ripping
Please click here for a chart of Alphabet (GOOG).
Note the following:
- The Morning Capsule is about the big picture and not about an individual stock. The chart is of GOOG to illustrate the point.
- NASDAQ is ripping in the pre market on GOOG earnings better than consensus and significantly better than whisper numbers.
- Sentiment is becoming positive on GOOG announcing a 20:1 stock split.
- Speculation is that the stock split will make it easier for GOOG to be included in DJIA.
- AMZN is moving higher on speculation that AMZN will feel compelled to split its stock and compete with GOOG to be included in DJIA. This is adding to the gains in NASDAQ.
- FB and AMZN earnings are ahead. If these earnings are as good as GOOG, expect NASDAQ to recover recent losses. On the other hand, if these earnings are not good, there is a strong probability of a retest of the recent NASDAQ low. This is the reason for the signals to take partial profits on leveraged NASDAQ ETF TQQQ position.
- The chart shows the prior high on GOOG. The chart shows that GOOG fell in the Arora buy zone, giving those investors who were not in GOOG and were aggressive or growth oriented an opportunity to buy GOOG. For more details of the buy zone and target zone, see the post from yesterday evening.
- The chart shows that GOOG is gapping up above the prior high at a time when there are serious concerns about tech stocks and many investors are exiting tech stocks.
- Good earnings from AMD are also helping to create a positive sentiment.
- There are nice gains on the AMD short term position and also on the XLNX long term position. As of this writing, the gain on XLNX is 119%. XLNX is being bought out by AMD. See separate posts on AMD and XLNX for details and signals.
- Expect bearish investors to sell tech stocks into the strength.
- We will be carefully watching smart money actions.
- There is a 35% probability that the selling by institutional investors who are following the business cycle script will overwhelm the early strong buying in NASDAQ and lead the overall market lower.
- If the economy is entering the late cycle, investors need to be especially selective with tech stocks and tech ETFs. For example, there may be a signal to trim the position in internet ETF FDN. There are likely signals ahead to short sell long duration tech stocks. For those who want the next-level information, there is a detailed podcast on long duration stocks. Our signals always take into account the business cycle. We have been receiving many requests from investors who want a deeper understanding of business cycle investing. In response, we are preparing a podcast on business cycle investing.
ADP
ADP is the largest private payroll processor in the country. It uses its data to give a glimpse of the employment picture ahead of the official jobs report that will be released on Friday morning.
ADP came at -301K vs. +220K consensus. This data is of concern if there is something more than Omicron to blame. Paradoxically, this data may bring buyers in thinking that the economy will become weaker and the Fed will be less aggressive in raising rates.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒stocks in the early trade. Smart money is 🔒 in the early trade.
Gold
The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial) gold in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see gold and silver ratings.
Oil
The OPEC+ meeting is taking place. The consensus is for 400K bpd increase in production.
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒 in the early trade.
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 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 $1803, silver futures are at $22.67, and oil futures are $88.96.
S&P 500 futures resistance levels are 4600, 4713, and 4770: support levels are 4460, 4400, and 4318.
DJIA futures are down 16 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.
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This post was just published on ZYX Buy Change Alert.
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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.
