Iran Optimism

Please click here for an enlarged chart of Direxion Daily Semiconductor Bull 3X ETF (NYSE:SOXL).

Note the following:

  • The chart shows semiconductors rallied yesterday on Iran peace hopes.
  • The chart shows semiconductors are rallying again in the early trade on Iran peace hopes.
  • The chart shows zone 1 (resistance).
  • Today is Friday before a long weekend.  Expect liquidity to be low.  Low liquidity and the potential of an Iran deal over the weekend are precisely the conditions that can lead to a vicious short squeeze driving the stock market, especially semiconductors, higher than you would think.
  • If a short squeeze carries SOXL above zone 1, technically oriented investors will jump in on the breakout.  For the momo crowd, SOXL at $200 will become the magnet.
  • Semiconductors are the leading sector.  If semiconductors go higher, they will carry the entire stock market higher.
  • Yesterday was full of conflicting reports on Iran.  These reports ranged from a deal was reached to there is no progress on the two sticky issues of uranium and opening the Strait of Hormuz.  This morning, there is an unconfirmed report that the Pakistani Army Chief is on his way to Iran.  This report is bringing in significant buying in the stock market, selling in oil, and buying in bonds.
  • For investors, all of the noise and conflicting reports regarding Iran can be difficult, especially since President Trump has been saying the deal was close for several weeks. 
  • Kevin Warsh will be sworn in as Fed Chair today.  Warsh has a difficult job as President Trump expects him to cut interest rates.  However, he cannot cut interest rates without support from the majority of FOMC members.  As we have previously shared with you, a majority of FOMC members are open to a rate hike and certainly do not want to cut interest rates.
  • In our analysis, the present Fed policy is in favor of easing.  Expect negotiations between Warsh and the rest of the FOMC.  Expect the rest of the FOMC to push Warsh to change Fed policy to neutral as a first step.  
  • China is the clear winner from the Iran conflict.  During President Trump's visit to China he was pushed hard by China to stop $14B worth of arms sales to Taiwan.  Acting Navy Secretary Hung Cao is saying the U.S. is pausing arms sales to Taiwan.  The reason Cao is citing is to make sure the U.S. has enough ammunition for the Iran conflict.  The U.S. Congress approved arms sales to Taiwan in January, but it requires President Trump's signature.  In our analysis, the pause in arms sales will cause anxiety in Taiwan, and China will count it as a win.
  • Chinese AI and semiconductor stocks have not moved up anywhere close to the U.S. AI and semiconductor stocks.  For those who can handle the China risk, China is an opportunity.  We have continuously covered China for 19 years.  The plan is to add a new ETF that covers the semiconductor supply chain in China. 

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), Microsoft Corp (NASDAQ:MSFT), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).

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

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust (NYSE: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 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.