Inflation Elevated

Please click here for an enlarged chart of SPDR S&P 500 ETF Trust (NYSE:SPY) which represents the benchmark stock market index S&P 500 (SPX).

Note the following:

  • The chart shows that even though the stock market has pulled back, it is still above zone 1 (support).
  • RSI on the chart shows the stock market is oversold.  Oversold markets tend to bounce.
  • The chart shows that the March low has undercut the December low.  Based on history, this pattern suggests a lower stock market ahead.  However, keep in mind that history does not always repeat itself.
  • Prudent investors should pay attention to reports of a red alert at Incirlik base in Turkey.  The base houses U.S. nuclear weapons.  Sirens went off at the base, and an explosion occurred near the base.  Turkey says it intercepted a ballistic missile.  Iranian ballistic missiles were previously fired at Turkey on March 4 and 9.  The U.S. is not using Incirlik base in its attacks on Iran.  Turkey has said that it does not want to be dragged into the war.
  • After President Trump previously said that Putin told him Russia was not helping Iran, now President Trump is suggesting that Russia is helping Iran.  Previously, there have been many reports of Russia providing Iran intelligence on U.S. military targets.
  • There are also reports that China is looking into providing missile components and financial assistance to Iran.  China buys most of Iran's oil.
  • The foregoing shows that the risk of the war expanding is not zero at a time when most investors are very complacent. 
  • The reason investors are complacent is that Wall Street convinced them this would be a short war lasting only a few days and every dip is a buying opportunity.  President Trump has reinforced this belief by saying that the war would be a short excursion and would be over soon.  How many days is a few days?  Today is the 14th day of the war.
  • PCE is the Fed’s favorite inflation gauge.  Inflation came as expected.  Here are the details:
    • Headline PCE came at 0.3% vs. 0.3% consensus.
    • Core PCE came at 0.4% vs. 0.4% consensus.
  • PCE data shows that inflation is remaining elevated, well above the Fed's target of 2%.  The data is from the period before the war started, and gas prices have risen since.  In our analysis, due to rising gas prices, inflation will go higher going forward unless the war ends soon.  At this time, the stock market is not expecting higher inflation.  
  • Durable orders data is weaker than expected.  Here are the details:
    • Durable orders came in at 0.0% vs 0.7% consensus.
    • Durable orders ex-transportation came at 0.4% vs 0.5% consensus.
  • The U.S. economy is 70% consumer based.  For this reason, prudent investors pay attention to personal income and personal spending.  Personal spending came stronger than expected.  Here are the details:
    • Personal spending came at 0.4% vs. 0.2% consensus.
    • Personal income came at 0.4% vs. 0.4% consensus.
  • GDP data is mixed.  Here are the details:
    • Q4 GDP Second Estimate came at 0.7% vs. 1.4% consensus.
    • Q4 GDP Deflator Second Estimate came at 3.8% vs. 3.7% consensus.
  • JOLTS job openings will be released at 10am ET.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis. 

In the early trade, money flows are positive in Apple Inc (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are negative in Meta Platforms Inc (NASDAQ:META).

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

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (NYSE:GLD).  The most popular ETF for silver is iShares Silver Trust (NYSE:SLV).  The most popular ETF for oil is United States Oil ETF (NYSE:USO).

Gold

The momo crowd is buying gold in the early trade, and this is reflected in gold ETF (GLD), silver ETF (SLV), VanEck Gold Miners ETF (NYSE:GDX), and Global X Silver Miners ETF (NYSE:SIL).  Smart money is inactive in the early trade.

Bitcoin

Bitcoin (CRYPTO: BTC) is seeing buying.

What To Do Now

Consider continuing to hold good, very long term, existing positions and add tactical positions based on signals.

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.

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