By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Ban On Russian Gold
Please click here for a chart of gold ETF (GLD).
Note the following:
- President Biden has announced that the US will ban Russian gold imports. We are receiving a large number of questions from The Arora Report members about the impact on gold prices.
- Several other G7 countries are also considering a gold ban.
- Russia exports about $15.5B worth of gold every year.
- In our analysis at The Arora Report, the ban on Russian gold exports will not have much impact on the price of gold for the following reasons:
- Unlike any other commodity, gold is not consumed. It is held. All of the gold ever mined in the world is either being held as jewelry or it is sitting in vaults.
- China and India are the two largest gold buyers in the world. Expect both of them to continue to buy Russian gold.
- This may be an opportunity for India, as India may be able to buy gold at a discount.
- It is very difficult to determine in which country gold was mined.
- The chart is confirming our analysis.
- The chart shows that gold has been under pressure but has made a higher low. This is a positive.
- Gold moves inverse to the dollar and interest rates.
- The dollar has been very strong and interest rates have been rapidly rising. Based on these two developments, gold should be trading about $200 below where it is trading at.
- The fact that the gold continues to trade significantly higher than where it should trade is a positive for gold. This indicates that gold is under accumulation by investors who are concerned about inflation.
- For the first time since 1918, Russia has defaulted on its foreign debt denominated in dollars.
- Typically a country defaults on debt when it runs out of money. However, the case with Russia is an exception. Russia is making more money now than it was prior to the Ukraine war. It is simply that due to the sanctions and special steps taken by the US government, Russia cannot use the banking system to make the debt payments.
- Investors should consider both developments of a ban on Russian gold and default on Russian debt as symbolic with no major consequences.
Durable goods data was released this morning. Here are the key points:
- Durable Goods Orders came at 0.7% vs. 0.1% consensus.
- Durable Goods Orders Ex-Transportation came at 0.7% vs. 0.4% consensus.
- These are very strong numbers.
- In our analysis at The Arora Report, durable goods numbers are very volatile. Investors need to look at the trend, not just one months’ numbers.
- The momo crowd was aggressively buying stocks in the early morning. The momo crowd’s gurus are urging them to buy stocks because they believe that the slowing economy will deter the Fed from fighting inflation.
- At least temporarily, durable goods orders data throws cold water on momo crowd gurus’ argument.
- Significant selling came in the stock market after the release of durable goods data.
- Expect the momo crowd to be oblivious to the data and buy stocks.
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.
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.
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
There is buying in bitcoin as bitcoin held above $20,000 over the weekend.
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 slightly 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 $1831, silver futures are at $21.34, and oil futures are $107.93.
S&P 500 futures resistance levels are 3950, 4000 and 4200: support levels are 3860, 3770 and 3630.
DJIA futures are up 35 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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