Tempered Rally

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 rally attempted in the early trade today was tempered.
  • The chart shows the volume continues to be low.  In our analysis, one reason for the low volume is that investors do not have conviction in this rally.  Instead of buying stocks, they are aggressively buying call options.  As investors aggressively buy call options, dealers who are selling the calls buy stocks to hedge.
  • Early this morning, the momo crowd was very aggressively buying stocks, especially semiconductor stocks such as Intel Corp (NASDAQ:INTC), Advanced Micro Devices Inc (NASDAQ:AMD), SanDisk Corp (NASDAQ:SNDK), and Micron Technology Inc (NASDAQ:MU), but then the news hit that Iran had struck a U.S. warship.  Stocks fell and oil rose on the news  The U.S. denied the news; stocks rose again, and oil fell.
  • As of this writing, selling is again coming into the stock market on a report of the U.A.E. issuing a missile threat.
  • The U.S. is saying it will guide neutral ships that are stuck in the Strait of Hormuz.  This guidance is supposed to be electronic.  Iran, in turn, is warning the U.S. to stay out of the Strait of Hormuz.
  • In an important development, China is ordering its companies to not obey U.S. sanctions.  Sanctions have been a major tool of U.S. foreign policy. China is taking this and other confrontational steps ahead of the Trump Xi meeting.  History shows that after the summit, the steps are often taken back, allowing both sides to declare victory.
  • Meme stock GameStop Corp (NYSE:GME) is making a buyout offer for eBay Inc (NASDAQ:EBAY).  eBay is four times the size of GameStop.  Stock market bears see this as a potential sign of a stock market top.
  • Bulls are encouraged by very strong earnings so far this earnings season.  However, prudent investors should note these strong earnings are concentrated in AI stocks.
  • Among important earnings, AI software Palantir Technologies Inc (NASDAQ:PLTR) reports after hours today.  Palantir carries the burden of proving that it should not be grouped with other software stocks and the selloff in PLTR stock is unjustified.  As full disclosure, PLTR is in our portfolio, long from an average of $20.15.  There is also a trade around position in PLTR.  Trade around positions are a technique used by billionaires and hedge funds to dramatically increase returns and reduce risk.
  • Amazon.com, Inc. (NASDAQ:AMZN) is opening its logistics services to outside businesses.  This is bringing in selling in United Parcel Service Inc (NYSE:UPS) and FedEx Corp (NYSE:FDX).  Companies such as Procter & Gamble Co (NYSE:PG) and 3M Co (NYSE:MMM) are already using Amazon logistics services.
  • The mother of all numbers, the jobs report, will be released on Friday at 8:30am 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 Amazon.com, Inc. (NASDAQ:AMZN) and NVIDIA Corp (NASDAQ:NVDA).

In the early trade, money flows are neutral in Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are negative in Apple Inc (NASDAQ:AAPL) and Microsoft Corp (NASDAQ:MSFT).

In the early trade, money flows are mixed 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) briefly spiked above $80K before pulling back.

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.