DOLLAR FALLS ON UKRAINE NEWS – BUYING IN STOCKS, GOLD, AND OIL ON LOWER DOLLAR

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By Nigam Arora & Dr. Natasha Arora

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

Lower Dollar

Please click here for a chart of dollar index ETF UUP.

Note the following:

  • The chart shows that until last week the dollar was very strong.

  • The strength in the dollar had put downward pressure on stocks, gold, oil, and bitcoin.
  • The chart shows that the dollar has broken down below the trend line.
  • The break down in the dollar was in part responsible for the stock market rally late last week.
  • The chart shows that this morning the dollar has fallen further on news from Ukraine.
    • The Ukrainian army is making surprisingly fast gains in a counter-offensive against the Russian army in the southeast of Kharkiv.
    • The new narrative is that it is possible for Ukraine to win.
    • If Ukraine wins, there will be less need for the safety of the dollar.
    • The celebration seems premature because Russia is not likely to accept a defeat.  It is not known at this point how Russia will react.
  • The RSI on the chart shows that there is more room for the dollar to fall.
  • There is aggressive buying in stocks due to the falling dollar.
  • As is their pattern, the momo crowd is buying ahead of the key CPI data tomorrow.  The reason is that the momo crowd uses the hope strategy without regard to risk.  In contrast, smart money is cautious before key events.  For details of CPI, please read Friday’s Morning Capsule.
  • As we have shared with you before, CPI data has a high probability of producing a binary event in the stock market with a potential large move on either side.
  • Quadruple witching is ahead this week.
    • So far, it appears that option expiration is putting upside pressure on the market.
    • There is more important economic data ahead this week.
      • PPI will be released on September 14.
      • Retail Sales will be released on September 15.
  • When the momo crowd gets in the buying mode, they buy anything that has news even if the news is negative.
    • Biden may widen the restrictions on exports of semiconductors from China.  This may especially negatively impact AMD and NVDA.  The momo crowd is buying semiconductors on the negative news.
    • Railroad works are threatening a strike. The momo crowd is buying railroad stocks such as CSX and UNP on the negative news.
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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

Gold moves higher when dollar goes down because gold is priced in dollars.

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

Oil is going higher on lower dollar as oil is priced in dollars.

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 going higher on lower dollar.

Markets

Our very, very short-term early stock market indicator is 🔒 but can quickly turn 🔒 if smart money starts selling or if there is more news from Ukraine.  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 $1743, silver futures are at $19.70, and oil futures are at $88.48.

S&P 500 futures resistance levels are 4200, 4318, and 4400  : support levels are 4000, 3950, and 3860.

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DJIA futures are up 78 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

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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