By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Front Running
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:
- The chart shows that the stock market is now in the profit taking zone for tactical positions.
- The chart shows that RSI is overbought. Overbought markets tend to be vulnerable to a pullback. You need to be aware that right now momo gurus have a different narrative about RSI – their narrative is that the strength in RSI indicates a higher market ahead.
- Today is the first day of the month. Blind money pours into Wall Street on the first few days of a new month. Blind money is the money that is invested without analysis and irrespective of market conditions. Wall Street knows this and is front running blind money this morning. Blind money is typically invested in the afternoons.
- Last night, futures were lower on a statement by Minneapolis Fed President Neel Kashkari, potential Nancy Pelosi visit to Taiwan, and new economic data from China. This morning, futures have run up on Wall Street front running. However, as of this writing futures are pulling back on reports related to Taiwan.
- Kashkari said that the Fed is serious about bringing inflation down to 2%. This runs counter to the momo gurus’ narrative that the Fed is going to stop raising rates and will start cutting rates.
- Two sources are reporting that Nancy Pelosi will visit Taiwan on a military plane. China has threatened to potentially shoot down her plane. As of this writing, there is no official confirmation.
- Purchasing Managers’ Index (PMI) is a leading indicator and carries heavy weight in our models. Please click here to see 10 crucial categories on input to ZYX Asset Allocation Model. A PMI number below 50 indicates economic contraction.
- China’s July manufacturing PMI fell to 49.0 vs. 50.4 consensus.
- The PMI data from Europe is painting a dim picture.
- July manufacturing PMI in France fell to 49.5 vs. 49.6 consensus.
- July manufacturing PMI in Spain fell to 48.7 vs. 50.2 consensus.
- July manufacturing PMI in UK fell 52.1 vs. 52.2 consensus.
- On the positive side, manufacturing PMI in India rose to 56.4 vs. 53.8 consensus.
Grains
The first ship carrying 26,000 tons of corn sailed from Ukraine as Russia has agreed to allow Ukrainian grain to be exported. The first ship’s name is Razoni, and it is flagged in Sierra Leone.
Our call on grains has proven spot on. Ukraine and Russia are two of the largest grain producers in the world, especially wheat. At the height of the frenzy created by the media and momo gurus to buy grains, The Arora Report gave a signal to short sell wheat near the high to take advantage of the frenzy created by momo gurus. Our call was that there will never be any sanctions on grain and a way would be found to export grain.
Wheat prices have tumbled in recent days and our wheat short position in wheat ETF (WEAT) in ZYX Short is highly profitable.
As is often the case, the momo crowd is left holding the bag on grains with massive unrealized losses.
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
Gold is running up on a weaker dollar.
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
Oil prices are falling on demand destruction.
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Over the weekend, bitcoin bulls were projecting a 35% rally this week. However this morning, short sellers are pressing hard causing the rally to stop as of this writing.
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 up, and bonds are ticking down after a big bond rally last week.
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 $1788, silver futures are at $20.47, and oil futures are $96.91.
S&P 500 futures resistance levels are 4200, 4318 and 4400: support levels are 4000, 3950 and 3860.
DJIA futures are down 158 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 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.
