By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Wall Street Mechanics Kicking In
Please click here for a chart of 20+ Year Treasury Bond ETF (TLT).
Note the following:
- The chart shows that TLT fell yesterday.
- As we shared with you in the Afternoon Capsule, the reason for the fall in TLT was the poor Treasury auction. For details, see yesterday’s Afternoon Capsule.
- Initially stocks fell on the poor Treasury auction, but the momo crowd bought the dip. Then came Powell’s statement that he was willing to raise rates if needed. The poor Treasury auction and Powell’s statement was a one-two punch that brought in more selling yesterday.
- The chart shows that TLT is being bought this morning but still has a ways to go before reaching the lower resistance zone.
- This morning Wall Street mechanics are kicking in, bringing in buyers in both stocks and bonds.
- University of Michigan consumer confidence and inflation expectation data will be released at 10am ET. The data may be market moving.
- The biggest data point ahead is CPI that will be released on November 14.
- Remember that it is Friday, and short squeezes tend to occur on Fridays. In the early trade, there are signs of a short squeeze.
- As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOG), Meta (META), Tesla (TSLA), and Apple (AAPL).
In the early trade, money flows are mixed in S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ).
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.
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.
The momo crowd is *** oil in the early trade. Smart money is *** in the early trade.
For longer-term, please see oil ratings.
Retail investors continue to rush to buy bitcoin on hopes that whales will take advantage of low liquidity over the weekend and drive bitcoin (BTC.USD) to $40,000.
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 $1950, silver futures are at $22.48, and oil futures are at $76.51.
S&P 500 futures are trading at 4380 as of this writing. S&P 500 futures resistance levels are 4400, 4460, and 4600: support levels are 4318, 4200, and 4000.
DJIA futures are up 137 points.
Protection Band 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.
Traditional 60/40 Portfolio
Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.
Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of seven year duration or less. Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.
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