INVESTORS: PAY ATTENTION TO ARORA’S THIRD LAW TO NAVIGATE UKRAINE CRISIS

By Nigam Arora & Dr. Natasha Arora

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

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Navigating Ukraine Crisis

Please click here for a chart of S&P 500 futures (ES_F).

Note the following:

• The chart illustrates why investors should set aside emotions and methods that do not work in this type of situation.
• The chart shows a significant drop in stock futures on Sunday evening on potential Russian oil ban.
• The chart shows when the media started focusing on planned talks in Turkey between Ukrainian and Russian foreign ministers.
• The chart shows a strong move up in futures as the news of talks in Turkey spread.
• The chart pattern in gold and oil has been the reverse of the pattern in stocks.
  • Initially gold and oil spiked on potential Russian oil ban.
  • As the news of talks in Turkey spread, gold and oil have given up a big part of the gains.
  • Investors who acted out of emotion or followed the news instead of looking ahead got whipsawed and lost money.
  • The foregoing pattern is also playing out on a longer timeframe.
• 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 VUD indicator in stocks is mixed, indicating that neither net supply nor net demand is dominating as of this writing.
• The VUD indicator in oil is mostly orange, indicating net supply is dominating as of this writing.
• The VUD indicator in gold has been mostly green even as gold was pulling back.  This indicates a strong net demand for gold.
• Keep in mind that the VUD indicator is a short term indicator.  It can quickly change.  Having said that, studying the VUD indicator on an ongoing basis gives valuable insights for long term investing.
• Start with Arora’s Second Law of Investing and Trading.  Here is the Second Law:

Nobody knows with certainty what is going to happen next in the markets.

• Investors should follow Arora’s Third Law of Investing and Trading.  Here is the Third Law:

Making investing and trading decisions based on probabilities is the only realistic and profitable approach.

• To learn all of Arora’s Thirty Laws, attend the Bulletproof Seminar.
• Here are the scenarios.
  • An off ramp is found for Putin to declare victory.
    • The probability is 35%
  • Russia meets its objectives.
    • The probability is 15%.
  • Fighting continues at or near the present level.
    • The probability is 15%.
  • Fighting accelerates.
    • The probability is 25%.
  • Other scenarios.
    • The probability is 10%.

Momo Crowd And Smart Money In Stocks

The momo crowd was 🔒 (To see the locked content, please take a 30 day free trial) stocks earlier but is now 🔒 stocks as of this writing in the early trade.  Smart money was 🔒 stocks earlier but is 🔒 stocks as of this writing 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 🔒 oil in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin is acting like a risk asset similar to speculative stocks and not as a hedge.  Bitcoin was lower when stock futures were lower.  Bitcoin is rallying as stock futures rally.

Markets

Our very, very short-term early stock market indicator is 🔒 as the market will move on news related to the oil ban and peace talks.  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 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 $1980, silver futures are at $25.74, and oil futures are $117.44.

S&P 500 futures resistance levels are 4400, 4600 and 4713: support levels are 4200, 4000 and 3950.

DJIA futures are down 56 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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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 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.