By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Blind Money
Please click here for a chart of Nasdaq 100 ETF (QQQ).
Note the following:
- On the first two days of a new month, blind money pours into the market. Blind money is the money that is invested in the market without any analysis irrespective of market conditions.
- Most of the blind money is invested in the afternoons. Wall Street knows this so they are buying now and bought on Friday. Then they will turn around and sell it to the blind money at a profit.
- The chart shows that in spite of blowout earnings from the likes of AAPL, GOOG, AMZN, MSFT, and FB, that QQQ is consolidating below the resistance line.
- The fact that QQQ did not break out above the resistance line on blowout earnings is a temporary warning sign.
- After the blind money is invested, seasonally there is weakness in the first three weeks of May. After the weakness, investors get enthused about Memorial Day and start running up the market.
- It is simply prudent to keep the moratorium in place temporarily to not initiate or add to long-term positions. It is perfectly fine to initiate or add to short term positions from the long side or trades from the short (sell-short) side with good setups.
- The moratorium will be lifted when a signal is given by the ZYX Allocation Model. Please click here to see the 10 categories of inputs that go into the ZYX Allocation Model.
- ZYX Allocation Model is an adaptive model. In plain English, the means that the model automatically changes with market conditions. Please click here to see how it works.
- The static models constitute a vast majority of the models that are out there. The problem with static models is that they may work under one set of market conditions but they stop working as market conditions change.
Ethereum Breaks $3,000
Crypto ethereum has broken above $3,000. The present rally was triggered by the news of the European Investment Bank potentially conducting a digital bond sale on the ethereum blockchain network.
Bulls are shooting for ether to reach $10,000.
Ether is outperforming bitcoin.
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🔒.
Gold
Gold is rocketing on the news that Chinese consumption of gold went up 93.9% in the first quarter of 2021 vs. the same quarter in 2020. Even though momo is buying gold on the news, remember that the first quarter of 2020 was a pandemic quarter in China. China is the largest consumer of gold.
The momo crowd is 🔒 gold in the early trade. Smart money is 🔒.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is 🔒 oil in the early trade. Smart money is🔒.
For longer-term, please see oil ratings.
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 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 $1786, silver futures are at $26.59, and oil futures are $63.46.
S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000,3950 and 3860.
DJIA futures are up 185 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, on dips, 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, 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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This post was just published on ZYX Buy Change Alert.
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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.
