Buying In Stocks On Pullback In Yields, Rush To Buy Bitcoin
To gain an edge, this is what you need to know today.
Buying In Stocks
Please click here for a chart of iShares 7-10 Year Treasury Bond ETF (NASDAQ:IEF).
Note the following:
- The trendline on the chart shows that IEF has been in a downtrend. IEF being in a downtrend means that the yield on 10 year Treasuries has been rising. This has been putting pressure on the stock market. The chart shows that IEF bounced yesterday and is bouncing more today as yields pull back from the psychologically important 5% level.
- The pullback in yields is bringing in buyers.
- Two very important earnings for the stock market are Microsoft Corp (NASDAQ:MSFT) and Alphabet Inc Class C (NASDAQ:GOOG). Both report earnings after the market close.
- As is their pattern, the momo crowd is buying tech stocks ahead of the earnings on hope strategy.
- Prudent investors need to remember that hope is never a good strategy.
- For your buying, consider sticking to the proven system with an unrivaled track record that combines the six screens of the ZYX Change Method and the adaptive ZYX Asset Allocation Model with inputs in ten categories.
- There is also buying coming into the stock market on delays in Israeli invasion of Gaza.
- Bitcoin and speculative stocks tend to be correlated. Buying is coming into speculative stocks in sympathy with the surge in bitcoin. Please scroll down to see the bitcoin section.
- Earnings are in focus as 30% of S&P 500 earnings are being reported this week. Among the important companies reporting earnings, earnings from Coca-Cola Co (NYSE:KO), Verizon Communications Inc. (NYSE:VZ), Rtx Corp (NYSE:RTX), Dow Inc (NYSE:DOW), 3M Co (NYSE:MMM), Sherwin-Williams Co (NYSE:SHW), General Motors Co (NYSE:GM), and General Electric Co (NYSE:GE) are better than expected; earnings from HCA Healthcare Inc (NYSE:HCA), AGNC Investment Corp (NASDAQ:AGNC), Corning Incorporated (NYSE:GLW), Packaging Corp Of America (NYSE:PKG), and Polaris Inc (NYSE:PII) are worse than expected.
- 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.
Japan
We have been sharing with you that the monetary policy in Japan is having a major impact on the U.S. stock market and the impact will likely increase as Bank of Japan (BOJ) tightens its monetary policy.
BOJ conducted a buying operation to purchase JGBs with maturities between 5 - 10 years and 10 - 25 years.
Japan is considering an income tax cut for individuals
Europe
European Central Bank (ECB) is likely to pause interest rate hikes and move to shrinking its balance sheet.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Microsoft, Alphabet, Meta Platforms Inc (NASDAQ:META), Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).
In the early trade, money flows are neutral in Apple Inc (NASDAQ:AAPL).
In the early trade, money flows are mixed in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).
Momo Crowd And Smart Money In Stocks
The momo crowd is buying stocks in the early trade. Smart money is 🔒 in the early trade. To see the locked content, please click here to start a free trial.
Gold
The momo crowd is buying gold in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see gold and silver ratings.
The most popular ETF for gold is SPDR Gold Trust (NYSE:GLD). The most popular ETF for silver is iShares Silver Trust (NYSE:SLV).
Oil
The momo crowd is selling oil in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
The most popular ETF for oil is United States Oil ETF (NYSE:USO).
Bitcoin
We have been sharing with you for some time that Bitcoin (CRYPTO: BTC) market cap may add $1T if a spot bitcoin ETF is approved. We have also been sharing with you the buying pattern in bitcoin. Retail investors are aggressively buying bitcoin after whales ran it up over the weekend. Retail investors are now learning about a potential spot bitcoin ETF.
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.
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 five 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.
The Arora Report is known for its accurate calls. The Arora Report correctly called the 2008 financial crash, the start of a mega bull market in 2009, the COVID crash, the post-COVID bull market, and the 2022 bear market. Please click here to sign up for a free forever Generate Wealth Newsletter.
