STOCK BUYING ON INTEREST RATE HIKE BETS REVERTING

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By Nigam Arora & Dr. Natasha Arora

To gain an edge, this is what you need to know today. 

Good Bank Earnings

Please click here for a chart of the S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).

Note the following:

  • The chart compares ETF SPY with Nasdaq ETF QQQ and bond ETF TLT.  The chart further compares four big bank stocks Bank of America (BAC), Citigroup (C ), Goldman Sachs (GS), and JP Morgan (JPM).
  • The chart shows that bonds made a low first in June.  The bond low was followed by a low in QQQ  and then by SPY.
  • The chart shows that TLT, SPY, and QQQ have not made lower lows in July so far.
  • The chart shows that three of the big bank stocks BAC, C, and JPM have made lower lows in July.
  • The chart shows that all four big bank stocks are experiencing a significant rally.
  • JPM earnings were below consensus and whisper numbers.  BAC earnings were in line with the consensus and whisper numbers.  C reported blowout earnings on rising net interest rate margins. GS reported earnings better than the consensus and whisper numbers this morning.
  • GS is a component of DJIA.  DJIA is a price-weighted index and GS carries the second highest weight of 6.19%.  Good earnings from GS and the resulting move up in DJIA futures are creating positive sentiment.
  • The next interest hike bets are reverting to 75 basis points from 100 basis points.  Several Fed officials have said that they prefer 75 basis points so as to not shock the economy.  This is bringing in more buying.
  • The dollar is weakening this morning on reversion of interest rate hike bets to 75 basis points.  This is adding to buying in stocks.
  • Stocks in Europe are stronger on the weaker dollar.  Some of the positive sentiment from Europe is spilling into the US.
  • It is prudent to wait for more evidence before making changes to the protection bands. 
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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 🔒 gold in the early trade.  Smart money is 🔒 in the early trade.

For longer-term, please see gold and silver ratings.

 

Oil

There is buying in oil on Biden failing to get Saudi Arabia to make a firm promise to increase oil production.  Saudi Arabia said it is up to OPEC+.

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 is seeing aggressive buying as investors return to buying risk assets.

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 $1706, silver futures are at $18.78, and oil futures are $98.36.

S&P 500 futures resistance levels are 3950, 4000, and 4200: support levels are 3860, 3770, and 3630.

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 futures are up 271 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.

To take a free 30-day trial to paid services to gain access to more opportunities, please click here.

This post was just published on ZYX Buy Change Alert.

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Nigam Arora

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

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.

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