TAX LOSS SELLING ABOUT TO END – POSITIONING FOR 2023 ABOUT TO BEGIN

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By Nigam Arora & Dr. Natasha Arora

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

Tax Loss Selling

Please click here for a chart of  Nasdaq 100 ETF (QQQ).

Note the following:

  • The chart shows that QQQ has dropped into the support/resistance zone.
  • The chart shows that the October low of the year is not far away.
  • The chart shows that RSI is very oversold.
  • The chart shows that the volume has not been high during the recent selloff.
  • The sum total of the foregoing is that from a traditional technical analysis perspective, the stock market is positioned to bounce.  However, investors need to keep in mind that traditional technical analysis no longer works as well as it used to.  For this reason, investors need to look at a comprehensive analysis such as the ZYX Asset Allocation Model.  ZYX Asset Allocation Model is an adaptive model that changes itself with market conditions. Please click here to see how adaptiveness is accomplished.
  • Seasonality is positive.
  • Bulls are still hoping for a Santa Claus rally that includes the last five trading days of 2022 and the first two trading days of 2023.
  • There has been intense tax loss selling in tech stocks, momo stocks, and meme stocks.  
  • For many institutions, today is the last day for tax loss selling.
  • As the tax loss selling ends, that should lift some of the selling pressure off the market.  However, many hedge funds are about to start positioning for short term trades for the new year.  It is not clear which way the net of such positioning will go.
  • Investors need to know that there are likely many stops right under the October low shown on the chart.
  • If the market gets close to the October low shown on the chart, hunt and destroy algorithms will take over and attempt to take out the stops.  For next level information, please listen to the podcast titled “Wall Street Secret: Hunt And Destroy Algorithms.”
  • If the October low is taken out, it will be a sell signal in traditional technical analysis and will cause technically oriented investors to sell; such investors are presently buying. Such a switch from buying to selling by technically oriented investors can potentially cause a big spike down.
  • As an actionable item, pay attention to the ‘Protection Bands And What To Do Now’ section below.
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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

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 coming under pressure because of two developments in the crypto world.

  • Kraken, a currency exchange focused on cryptos, is ending operations in Japan.
  • Solana, a popular crypto, is plunging on concerns that whales are about to sell.

On the positive side, MSTR bought 2395 bitcoins for about $42.8M in cash during November 1 to December 21.  Some investors are seeing this as a sign of confidence.  However, prudent investors need to keep in mind that lately, MSTR has been wrong, is sitting on a huge loss, and the buying is relatively small.

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 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.

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Gold futures are at $1818, silver futures are at $24.27, and oil futures are at $78.90.

S&P 500 futures resistance levels are 3950, 4000, and 4200: support levels are 3770, 3630, and 3600.

DJIA futures are up 40 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 good, very long term, 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.

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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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