By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
PCE
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:
- PCE is the Fed’s favorite gauge of inflation. The data just released shows good news. Here are the details:
- PCE came at 0.6% vs. 0.7% consensus.
- Core PCE came at 0.3% vs. 0.4% consensus.
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- The data would have normally caused a 1000 Dow point rally, but futures are way down for the following reasons.
- ECB President Christine Lagarde said that the era of low inflation is over. This is not what momo gurus want.
- There is heavy selling of stocks in Europe on recession fears. Selling is spilling into US stock futures.
- Bitcoin has fallen below $20,000. Deleveraging in bitcoin is spilling into stock futures.
- The chart shows that the market is now firmly in the support / resistance zone.
- The chart shows that the market is in the low band of the support / resistance zone.
- President Biden is holding a press conference. What Biden says may move the market. Whichever way the market starts moving, the move will be exaggerated with machines jumping in on that side. Also, how bitcoin trades from here may have a major impact on the stock market in the very short term.
A Strategic Move By Russia
In an unexpected move, Russia has moved out of strategic Snake Island. Russia says that the move is a goodwill gesture to facilitate export of wheat from Ukraine. As a full disclosure, ZYX Short has a short position in wheat ETF WEAT. The position is very profitable.
It is hard to say what Putin’s real intention is, but on the surface, this is a positive development. Stock market bears need to keep in mind that if hostilities lessen in Ukraine, the stock market can potentially have a very strong rally.
At this time, the media is not highlighting this potentially good news.
China Economy Bottoms
The media is also not highlighting the good news from China. China’s economy may have bottomed. The official PMI rose to 50.2 vs. 50.5 consensus. Even though PMI is less than the consensus, it is good news because any number above 50 indicates economic expansion.
Holiday Schedule
Starting this afternoon, liquidity in the stock market will drop as senior managers head out for the Independence Day holiday. Trading desks will be manned by junior personnel. The stock market will be closed on Monday.
Due to Independence Day, the next Capsule will be on July 6. If the market conditions change requiring a change in our present calls, you will receive a post.
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 🔒 stocks in the early trade after favorable inflation data.
Gold
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
As of this writing, the results of the OPEC+ meeting are not clear.
The momo crowd is 🔒 in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin has fallen below the psychological level of $20,000.
SEC has rejected Grayscale’s application for spot bitcoin ETF. Grayscale has sued the SEC. The problem Grayscale is facing is that GBTC, a popular vehicle to buy bitcoin, is trading at a significant discount to the net asset value. Greyscale was planning to convert the bitcoin trust into a bitcoin ETF. Such a move would have eliminated the discount.
Markets
Our very, very short-term early stock market indicator is 🔒, but expect the 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.
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 $1822, silver futures are at $20.53, and oil futures are $109.35.
S&P 500 futures resistance levels are 3860, 3950 and 4000: support levels are 3630, 3600 and 3520.
DJIA futures are down 343 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 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.
