By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Nice Profits On Tactical Positions
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 market is in the resistance zone.
- RSI on the chart shows that the market is neither overbought nor oversold.
- The chart shows the Santa Claus rally is in full swing.
- Sentiment is extremely positive. Prudent investors should take note, this is a contrary indicator. We previously wrote:
As we have been sharing with you, at extremely positive, sentiment is a contrary indicator. In plain English, sentiment at extremely positive is a sell signal. Here are the key points:
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No one should act based only on sentiment.
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Sentiment is an important indicator but only one of the many indicators that go into a comprehensive 360 degree analysis.
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Sentiment is not a precise timing indicator.
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If the stock market pulls back, sentiment may also pull back, and thus negate any negative implications.
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Market mechanics continue to be on the positive side.
- When the calendar changes to the new year, the stock market can abruptly change. We previously shared with you:
In The Arora Report analysis, the start of the new year will likely be the same as every other new year after a strong year for the stock market — if the stock market starts going down, everyone will jump on the selling bandwagon; if the stock market starts going up, everyone will buy.
- There are nice profits on tactical positions. It is prudent before the year end to take partial profits on tactical positions or raise hedges or a combination of the two.
- Consider continuing to hold strategic positions.
- Be ready to take more profits and raise hedges depending upon how the stock market behaves in the new year.
- As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Tesla (TSLA), Nvidia (NVDA), and Meta (META).
In the early trade, money flows are neutral in Microsoft (MSFT), Alphabet (GOOG), and Apple (AAPL).
In the early trade, money flows are negative in Amazon (AMZN).
In the early trade, money flows are positive in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).
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
The momo crowd is *** 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 (BTC.USD) is range bound.
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 down, and bonds are ticking up.
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 $2079, silver futures are at $24.33, and oil futures are at $74.96.
S&P 500 futures are trading at 4827 as of this writing. S&P 500 futures resistance levels are 4852, 4918, and 5020: support levels are 4770, 4713, and 4600.
DJIA futures are unchanged.
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.
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 seven 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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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.
