PUTIN’S FRANKENSTEIN SUBDUED BUT INVESTORS EXUBERANT OVER AI NEED TO BE MINDFUL OF THE TAIL RISK

By?Nigam Arora?& Dr. Natasha Arora

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

Be Mindful Of The Tail Risk

Please?click here?for a chart of Nasdaq 100 ETF (QQQ).

Note the following:

• The chart shows the steep trendline driven by the?AI?frenzy.
• The chart shows that?QQQ?has now fallen below the trendline.
• RSI on the chart shows that there is a fair probability of a pullback.
• As the momo crowd’s exuberance with?AI?continues, smart money is paying attention to the tail risk from Russia.
• Russia has the largest number of nuclear weapons.?Russia has an arsenal of 6850 nuclear weapons and 1634 are deployed.?Most of the deployed weapons are pointed at Western Europe and North America.
• Irrespective of what you think of Putin, due to the large number of deployed nuclear weapons, the stability of Russia is important to the world and the financial markets.
• Over the weekend,?Yevgeny Prigozhin presented an unprecedented challenge to Putin.?Prigozhin, a Putin creation, turned into Putin’s Frankenstein.
• Prigozhin went from a convicted criminal for robbing apartments to the owner of a hot dog stand to the owner of fancy restaurants to catering Putin’s parties and being known as Putin’s chef to the owner of the Wagner group.?The Wagner group became the most powerful mercenary group in the world.?The Wagner group is responsible for many of Russia’s victories in Ukraine.
• Prigozhin led his men to capture a major Russian city and Russia’s Southern Military Command and then marched towards Moscow unopposed.
• At the eleventh hour, a deal was struck that defused the crisis.?Prigozhin’s men were supposed to go back to their bases, and Prigozhin was supposed to leave for Belarus.
• There is no clarity as to exactly what is happening in Russia right now.
• Could Prigozhin’s mutiny simply be a ruse for something much bigger??Is more instability ahead in Russia?

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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

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

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

For longer-term, please see oil ratings.

Bitcoin

Bitcoin is range bound.

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 $1940, silver futures are at $22.83, and oil futures are at $69.35.

S&P 500 futures are trading at 4385 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 down 25 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.

See also??PRUDENT INVESTORS WATCH THIS LEADING SECTOR FOR AI DRIVEN MARKET DIRECTION

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.

To take a free 30-day trial to paid services to gain access to more opportunities, please?click here.

This post was just published on?ZYX?Buy Change Alert.

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