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

Speculative Sentiment

Please click here for an enlarged chart of Tesla Inc (NASDAQ:TSLA).

Note the following:

• This article is about the big picture, not an individual stock. The chart of TSLA stock is being used to illustrate the point.
• As we shared with you yesterday, speculative sentiment has been playing a big part in the stock market’s rise.
• The movement in TSLA stock plays a big role in speculative sentiment.
• The chart shows TSLA stock fell after earnings.
• The chart shows that the prior support zone has now become a resistance zone.
• Historically, when a stock rises on gamma squeeze, the rise often turns out to be temporary. So far, it appears that will be the case with TSLA stock. This illustrates why it is important for investors to understand market mechanics such as gamma squeeze. Wall Street professionals keep market mechanics close to the chest because of their high value.
• Prior to TSLA earnings release, in yesterday’s Morning Capsule, we wrote:

Electric vehicle business continues to be weak and is likely to further weaken.

Germany

Flash Manufacturing PMI came at 42.6 vs. 44.1 consensus. A number less than 50 is considered economic contraction. Deepening economic contraction in Germany is impacting the rest of the Eurozone.

Magnificent Seven Money Flows

In the early trade, money flows are negative in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Momo Crowd And Smart Money In Stocks

Bitcoin

Bitcoin (CRYPTO: BTC) whales continue to push the rumor that Trump could set up a national bitcoin reserve.  The rumor continues to bring buying to bitcoin.

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.

A protection band of 0% would be very bullish and would indicate full investment with 0% in cash.  A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.

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.

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