To gain an edge, this is what you need to know today.
Pay Attention
Please click here for a chart of Microsoft (MSFT).
Note the following:
- The Morning Capsule is focused on the macro picture. Typically individual stocks are not discussed unless there is a major implication for the entire market.
- The reaction after Microsoft’s earnings has potential major implications. The chart shows when earnings were released.
- Earnings were strong, better than the consensus and better than the whisper numbers.
- The chart shows an up spike on the earnings. The up spike was caused by momo crowd buying.
- We previously published a chart of money flows in 11 popular tech stocks. Please click here for the money flow chart. The chart showed that momo crowd money flows were positive going into earnings but smart money flows were neutral.
- The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange indicates net supply and the green indicates net demand.
- The VUD indicator was positive after the earnings release.
- The chart shows that the up spike on good earnings did not sustain itself and the stock drifted lower.
- The chart shows the conference call.
- The conference call was positive. If the same conference call would have happened a couple of weeks ago, there would have likely been an up spike in the stock.
- The chart shows that Microsoft continued to drift down after the conference call.
- The chart shows brokers raising their targets.
- Microsoft is the bluest of the blue chips.
- Microsoft is the safest stock among the big five that include Apple (AAPL), Amazon (AMZN), Google (GOOG) and Facebook (FB).
- The momo crowd is buying Microsoft post earnings.
- Smart money is selling Microsoft post earnings.
- Over the last several months, the momo crowd has been significantly more aggressive than smart money.
- In the case of Microsoft post earnings, smart money has been more aggressive than the momo crowd.
- It is very instructive because Microsoft is a core holding in a large number of institutional portfolios.
- After carefully studying Microsoft’s earnings and listening to the conference call, our analysis is that smart money selling has nothing to do with Microsoft itself but has to do with the overall macro picture.
- When the reaction to news is different from the expectations, it is an important clue.
The Guru Dance
Many of the gurus who on market up days have been making bullish pronouncements and saying that the virus did not matter are now coming out of the woodwork to make bearish pronouncements and are saying that the virus matters. The guru dance continues.
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 🔒 .
Gold
Gold is priced in dollars. The dollar is stronger on virus concerns. This is hurting gold.
The momo crowd is 🔒 gold in the early trade. Smart money is 🔒.
For longer term, please see gold and silver ratings.
Oil
API reported a build of 4.577M barrels vs. a consensus of a build of 1.11M barrels.
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒.
For longer term, please see oil ratings.
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 $1880, silver futures are at $23.54, and oil futures are $37.72.
S&P 500 futures resistance levels are 3390, 3420 and 3460: support levels are 3278, 3228 and 3182.
DJIA futures are down 611 points.
Protection Bands and What To Do Now?
It is important for investors to look ahead and not in the rear view mirror.
Consider continuing to hold existing positions. Based on individual risk preference, consider holding 🔒 in cash or treasury bills or short term bond funds 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, 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.
This post was just published on ZYX Buy Change Alert.
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