Ahead Of The Curve

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 the stock market has now moved above the upper band of zone 1.  Zone 1 was previously resistance and is now support.
  • The chart shows the stock market is now close to the magnet.
  • The chart shows the volume on the rally has remained low.
  • RSI on the chart shows the stock market is very overbought.  Overbought markets tend to be vulnerable to a selloff.
  • President Trump is saying the Iran war is "close to over."
  • Many investors are aggressively buying now after President Trump's statement.  Such investors feel that now it is all clear.  Buying here is a classic mistake for the following reasons:
    • The stock market is very overbought.
    • It is near the magnet.
    • Volume is low.
    • It is after a major rally.
  • The right course of action is to buy either on a pullback or on a decisive break above the magnet.
  • Interestingly, investors who are buying now are the same investors who were selling when the stock market was hitting recent lows near the low band of zone 2 (support).  The reaction of these investors is understandable because they were protecting themselves when the stock market went lower than they expected.  Now, they are buying because they feel it is all clear.
  • Prudent investors need to know that markets always move before it is all clear, as shown on the chart.  
  • Among notable earnings today Bank of America Corp (NYSE:BAC) reported earnings better than whisper numbers.  As full disclosure, BAC is in our portfolio, long from an average of $7.69.
  • Another important earning today is from Dutch company ASML Holding NV (NASDAQ:ASML).  ASML is the undisputed leader in extreme ultraviolet lithography machines.  Without ASML's machines, none of the advanced AI chips could have been manufactured.  ASML beat earnings and revenue consensus and whisper numbers but is guiding Q2 revenue below consensus.  Guidance for FY26 is inline. 
  • During this rally, semiconductors have been the hottest sector.  The rally in semiconductors has been driven mostly by a short squeeze and extremely aggressive momo crowd buying.  The momo crowd believes the AI trade is finally back again.  After ASML earnings, how semiconductors respond today will be an important tell.  
  • NVIDIA Corp (NASDAQ:NVDA) stock has finally been rallying over the last few days.  NVDA closed at $196.51.  As of this writing In the premarket, NVDA is trading at $195.51 due to ASML earnings.  The psychological resistance level of $200 is ahead.  How NVDA stock behaves around the psychological resistance will also be a tell.
  • The Fed's Beige Book will be released at 2pm 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 Meta Platforms Inc (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are neutral in Apple Inc (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN).

In the early trade, money flows are negative in Alphabet Inc Class C (NASDAQ:GOOG) and Nvidia (NVDA).

In the early trade, money flows are neutral 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 (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (NYSE:USO).

Oil

API crude inventories came at a build of 6.1M barrels vs. a consensus of a draw of 1.3M barrels.

Bitcoin

Among Bitcoin (CRYPTO: BTC) bulls, there is a lot of bullishness, and they believe bitcoin will reach $100K shortly.  The bullishness is driven by President Trump's comments on the end of the Iran war.  This once again shows bitcoin is not a hedge, as has been promoted, but is a highly speculative risk asset.

Bitcoin is range bound.

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.