By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Importance Of Positioning
Please click here for a chart of Tesla (TSLA).
Note the following:
- The Morning Capsule is about the big picture and not about individual stocks.
- The chart of Tesla is being used simply to illustrate the bigger point – investors should understand the importance of positioning.
- The chart shows when TSLA earnings were released.
- TSLA earnings were spectacular – they were ahead of the whisper numbers on most metrics. Stocks move based on the difference between the reported numbers and whisper numbers. Whisper numbers are the numbers that analysts provide privately to their best clients. Consensus numbers are the estimates that are published and become available to the public. One of the best-kept secrets is that those with less knowledge are routinely misled by Wall Street and the media in believing that stocks move based on consensus numbers.
- Considering the history of implied volatility around earnings of TSLA stock, TSLA stock should have moved up $50 to $75 on these great earnings and the VUD indicator should have been solid green. The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.
- The chart shows that there was a very small move of about $17 after the earnings release and then the stock pulled back.
- The chart shows that as of this writing, the VUD indicator is orange.
- Sometimes there is a delayed reaction and it is conceivable that TSLA stock may move up. However, if the stock does not move up strongly, it is a big tell on positioning in TSLA stock.
- Most investors who are likely to buy TSLA stock already own enough TSLA stock. This means that even though earnings are great, there are not enough investors left to buy the stock to run it up higher.
- Short squeezes have often added to the gains after earnings. In this case, the inference is that short-sellers who were going to buy to cover based on a small rise had already covered before the earnings.
- The main point is that just like TSLA, the overall positioning of investors in the stock market is very high now. This means that it is harder for the stock market to move higher even on good news.
False Amazon Rumor
The report about Amazon getting ready to accept bitcoin previously caused a massive short squeeze in bitcoin. The report has turned out to be false. It is common for pumpers to get false reports published even in reputable media. In this case, somebody handsomely profited by engineering a massive short squeeze in bitcoin.
Durable Goods Ex-transportation came at 0.3% vs. 0.9% consensus.
Headline Durable Goods came at 0.8% vs. 2.1% consensus.
Home Price Index
Case-Shiller Home Price Index came at 17.0% vs. 15.2% consensus.
Fed meeting is underway. The Fed will announce results at 2:00 pm ET tomorrow.
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🔒.
The momo crowd is 🔒 gold in the early trade. It is the momo crowds’ pattern to buy gold ahead of the Fed decision. Smart money is 🔒.
For longer-term, please see gold and silver ratings.
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒.
For longer-term, please see oil ratings.
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 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 $1803, silver futures are at $25.17, and oil futures are $71.90.
S&P 500 futures resistance levels are 4460 and 4600: support levels are 4400, 4318 and 4200.
DJIA futures are down 96 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 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, 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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