By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Strong Services Data
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:
- Stocks have been rallying hard for the following reasons:
- Seasonality is positive.
- As we previously shared with you, momo gurus’ highly misleading narrative that focuses on the Fed slowing rate increases, but not on the terminal rate has taken hold.
- Momo gurus are projecting S&P 500 to reach 4500 by the end of the year. This projection is creating FOMO (fear of missing out).
- Prudent money managers who did not shift gears when the October/November rally started are now being forced to hold their noses and buy stocks.
- The chart shows that the rally caused the stock market to go into the support/resistance zone.
- In the Afternoon Capsule, we shared with you that the ISM Non-Manufacturing Index was very strong. It came at 56.6% versus 53.5% consensus.
- We shared with you our analysis of the ISM data:
This is a negative for the stock market as it means services are not yet responding to the Fed’s tightening.
- The chart shows that the stock market fell below the support/resistance zone as smart money sold the strong ISM data. This is a negative.
- RSI is now on a sell signal after the strong ISM data but can quickly turn to a buy signal again.
- On the positive side for the bulls, volume was not heavy on the pullback.
- The stock market is waiting for a catalyst.
- The key data ahead is Producer Price Index (PPI) which will be released on December 9 at 8:30am ET.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial) 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 🔒 in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin 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 $1792, silver futures are at $22.70, and oil futures are at $75.82.
S&P 500 futures resistance levels are 4200, 4318 and 4400: support levels are 4000, 3950 and 3860.
DJIA futures are up 21 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 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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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.
