Strait Of Hormuz Open

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:

Supporting the stock market this week will be $30B – $40B of buying by Commodity Trading Advisors (CTAs).  CTAs tend to be systematic, algorithmic driven, trend followers.  They are going to buy because the trend has reversed from negative to positive.  Most CTAs do not analyze the market, other than the trend.

  • In our analysis, CTAs have already exceeded our buying estimate.
  • In the early trade, buying continued in the stock market in anticipation of more CTAs buying and more short squeeze.
  • In the early trade, buying in stocks picked up on a report that Iran has agreed to give up its enriched uranium, and in return, the U.S. will unfreeze $20B of Iranian assets.  President Trump has said that a deal is close and an extension to the ceasefire may not be necessary.
  • On top of already aggressive buying, buying has spiked even higher as of this writing on Iran Foreign Minister Araghchi saying the Strait of Hormuz is now completely open.
  • In the middle of this euphoria, prudent investors should note the following from the chart:
    • RSI indicates the stock market is extremely overbought.  Overbought markets tend to be vulnerable to a pullback.
    • The chart shows the volume yesterday was even lower than the day before. Low volume is indicative of the stock market running up on mechanical buying based on CTA algorithms and short squeeze without deep analysis.
  • In our analysis, looking ahead, there is a potential trigger for a new leg up in the stock market.  President Trump is calling inflation fake.  He is pivoting from the war to affordability.  President Trump knows affordability is a huge issue for the midterm election.  If President Trump's inflation narrative takes hold, it will drive the stock market higher.  

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 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 (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).

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.