By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Small Caps
Please click here for a chart of small cap Russell 2000 ETF (IWM).
Note the following:
- The chart shows the 2021 high in small caps.
- The chart shows the high in small caps in 2023.
- The chart shows small caps are still well below the 2021 high.
- Small caps staged a big rally in 2023, but small caps have not rocketed to new highs like the S&P 500. This may be an opportunity for investors. Here is what investors should keep in mind:
- IWM could be a catch up trade.
- On the other hand, small caps should have performed better than they have. The difference could be explained due to the lack of high flying AI stocks in IWM, or the difference could be a warning.
- Small caps are interest rate sensitive and should do well when the Fed cuts rates.
- Small caps are economically sensitive. As such, small caps should do well if there is no landing.
- IWM includes many banks. If there is no banking crisis, IWM should do well.
- If the overall stock market maintains its gains, small caps provide an opportunity to investors.
- IWM is in the ZYX Allocation Model Portfolio.
- Fed speak is ahead. The Fed’s Michelle Bowman, Tom Barkin, and Neel Kashkari will be speaking today.
- Consumer Price Index (CPI) will be released Tuesday at 8:30am ET. The stock market is assuming that inflation will continue to go down. If CPI shows that inflation is continuing to come down, S&P 500 will rally. On the other hand, if CPI is stronger than expected, there is a lot of air in the stock market and as such may lead to a rapid pullback.
- Momo gurus are already being proactive to prevent a selloff if the data shows that inflation is not coming down. The new mantra of momo gurus is that stocks will go up even if inflation does not come down. Keep in mind that momo gurus’ real job is to run up the stock market under the disguise of analysis.
- 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 Nvidia (NVDA).
In the early trade, money flows are neutral in Apple (AAPL), Amazon (AMZN), Meta (META), and Microsoft (MSFT).
In the early trade, money flows are negative in Alphabet (GOOG) and Tesla (TSLA).
In the early trade, money flows are mixed 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 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 *** in oil in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin (BTC.USD) rallied to $48,795, where it met resistance. It is pulling back as of this writing on slight disappointment that whales did not push bitcoin to $50,000 over the weekend. Those who understand whales’ secrets know that whales are very smart, and they preserve the element of surprise, not always doing exactly what is expected.
For those who are serious about profiting from bitcoin, it is imperative to learn the 22 secrets of bitcoin whales. Bitcoin whales and promoters do not want you to know these secrets. The best way to learn these secrets is from the three-part series titled “Whales’ Secrets You Need To Know: Capturing Bitcoin Profits.”
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 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 $2033, silver futures are at $22.84, and oil futures are at $76.15.
S&P 500 futures are trading at 5042 as of this writing. S&P 500 futures resistance levels are 5210, 5400, and 5500: support levels are 5020, 4918, and 4852.
DJIA futures are down 48 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.
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.
