By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
A Way Forward
Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- Expect major volatility ahead. This morning’s events illustrated below make the point.
- The chart shows a green bar for the day to the right hand side in the pre market.
- Stock futures had turned positive last night but fell this morning as European stocks fell on concerns about a Russian invasion of Ukraine.
- In the early morning, money was flowing out of stocks into bonds, oil, and gold.
- Around 7:30 am ET came a statement from Russian Foreign Minister Sergey Lavrov that he saw a way forward with talks.
- Lavrov’s statement changed money flows.
- Money started flowing into stocks.
- Money started flowing into Russian stocks.
- Money started flowing out of oil.
- Money started flowing out of gold.
- Money started flowing out of bonds.
- In response to Lavrov’s statement, the dollar fell, and the Russian currency ruble rose.
- The foregoing illustrates that at a time when there is significant bearishness, stocks can easily spike up. In our analysis at The Arora Report, right now, the probability of a 10 – 12% drop in the stock market is about the same as the probability of a 5 – 8% rise.
- The chart shows the trendline. There will need to be a breakout above the trendline to create bullishness. Stocks can easily break above the trend line on a de-escalation related to Ukraine.
- The chart shows the support zone.
- The chart also shows the lower support zone.
- The chart shows where the stops are. If the market goes below the top support zone, hunt and destroy algorithms will try to take the stops out.
- To add to the uncertainty, the Fed is conducting a closed meeting of the Board of Governors at 11:30 am ET. The rumors about the meeting can easily move the market to either side.
- Bullard is a hawkish Fed officer. His appearance on television moved stocks lower after Lavrov’s statement moved stocks higher. Please see the capsules from the last week.
- Adding to the bearishness this morning is that Goldman Sachs (GS) has revised its forecast for S&P 500 to 4900. Not long ago, Goldman had increased its forecast to 5100. Goldman is also calling for overweighting cash now. It is of note that until now, Goldman has been very bullish and wrong this year.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial) in the early trade. Smart money is 🔒 in the early trade.
Gold
The momo crowd is 🔒 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 🔒 in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Markets
Our very, very short-term early stock market indicator is indeterminant as the market will be driven by the rumors. 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 $1861, silver futures are at $23.86, and oil futures are $92.68.
S&P 500 futures resistance levels are 4460 and 4600: support levels are 4318, 4200, and 4000.
DJIA futures are down 18 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.
