Buying Ahead Of Powell On Hopium Key Apple Level, Bitcoin Whales Take Profits

To gain an edge, this is what you need to know today.

Stock Buying On Hopium

Please click here for an enlarged version of the chart of Apple Inc AAPL.

Note the following:

• This article is about the big picture, not an individual stock. The chart of AAPL stock is being used to illustrate the point.
• The chart shows AAPL stock has fallen to a critical level – the bottom band of the support/resistance zone.
• The chart shows where the stops of less informed investors are.
• If the stock market starts falling, Wall Street’s hunt and destroy algorithms will go into action and take out the stops of less informed investors.
• On very long term good positions, such as AAPL, prudent investors should consider using hedges when appropriate. Hedging allows you to hold on to very long term positions.  
• As a full disclosure, AAPL stock is in ZYX Buy Core Model Portfolio and is long from $4.68. Even after the drop in AAPL stock price, this represents a gain of 3548%.
• The chart shows two Arora signals to hedge AAPL stock.
• The chart shows that the hedges on AAPL are nicely profitable.
• The chart shows RSI convergence – RSI foreshadowed AAPL stock drop.
• RSI on the chart shows that AAPL stock is now oversold. Expect buying to come in on the slightest bit of good news.
• The chart shows AAPL stock making lower highs. This is a technical negative.
• In The Arora Report analysis, the divergence that is developing between AAPL and Invesco QQQ Trust Series 1 QQQ is a yellow caution signal for investors.
• Here is the key question for investors: Will the divergence be resolved by AAPL moving higher or QQQ moving lower.
• Powell is giving testimony in front of Congress. Here are the key points Powell will say based on his prepared text:
  • Inflation has eased but remains above the 2% goal.
  • The policy rate is likely at its peak.
  • If the economy evolves as expected, it will be appropriate to begin dialing back policy restraint at some time this year.
  • Reducing policy restraint too soon or too much could result in a reversal of progress on inflation.   
  • We will be carefully listening to the Q&A. Expect lawmakers to push Powell to cut rates.
• The momo crowd is aggressively buying tech stocks, crypto, and other junk stocks on hopium that Powell will be dovish in his answers.
• Automatic Data Processing Inc ADP is the largest payroll processor in the country and uses its data to give an advanced glimpse of the jobs picture ahead of the official jobs report that will be released on Friday at 8:30am ET.  ADP employment change came at 140K vs. 150K consensus.
• The JOLTS - Job Openings report will be released at 10am ET. It may be market moving.
• The Fed’s Beige Book will be released at 2pm ET. It may be market moving.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Amazon.com, Inc. AMZN, Alphabet Inc Class C GOOG, Meta Platforms Inc META, Microsoft Corp MSFT, and NVIDIA Corp NVDA.

In the early trade, money flows are negative in Tesla Inc TSLA.

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust Series 1 QQQ.

Momo Crowd And Smart Money In Stocks

The momo crowd is aggressively buying stocks in the early trade. Smart money is inactive in the early trade.

Gold

The momo crowd is buying gold in the early trade. Smart money is inactive in the early trade.

For longer-term, please see gold and silver ratings.

The most popular ETF for gold is SPDR Gold Trust GLD. The most popular ETF for silver is iShares Silver Trust SLV. 

Oil

API crude inventories came at a build of 0.423M barrels vs. a consensus of a build of 2.6M barrels.

The momo crowd is buying oil in the early trade. Smart money is inactive in the early trade.

For longer-term, please see oil ratings.

The most popular ETF for oil is United States Oil ETF USO.

Bitcoin

Yesterday when bitcoin BTC/USD reached an all time high of $69,000, bitcoin whales sold to take profits, causing bitcoin to quickly drop below $60,000.  Mom and pop saw the drop as a buying opportunity and have been aggressively buying since then, running up bitcoin to over $67,000.   

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 a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. 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.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.