Weak Under Surface

Please click here for an enlarged chart of Micron Technology Inc (NASDAQ:MU).

Note the following:

  • This article is about the big picture, not an individual stock.  The chart of MU stock is being used to illustrate the point.
  • Micron is important because it is the poster child for the current semi and options manias.
  • RSI on the chart shows there is more room for MU stock to run.
  • Volume on the chart is higher on yesterday's 19% one day rally.
  • From the market mechanics side, the big reason for the MU explosive rise is a gamma squeeze.  As the momo crowd extremely aggressively bought calls on MU and MU approached strike prices, market makers were forced to buy MU stock.  All investors can gain a significant edge in the stock market by deeply understanding market mechanics.
  • We have been sharing with you for a long time that semiconductor demand, including memory demand, is going to continue, but it is going to slow down in 2028.  Keep in mind, the stock market reacts in advance of the slow down.  The slow down may present a great short selling opportunity.  Just like an athlete trains for an event, for those interested in capturing this potential opportunity, you need to start practicing short selling now.  One of the reasons for the explosive rally in MU stock was a statement from Micron CEO that demand would continue through 2026.  Another reason was a Wall Street analyst setting a target of $1625 for MU. We are long MU from an average of $21.77.
  • Micron's valuation has now topped $1T.
  • In addition to the ongoing semiconductor and options manias, a new mania is in full swing.  The new mania is a space mania.  The space mania was triggered by the upcoming SpaceX (SPCX) IPO. We have given several profitable signals on space positions, including Tema Space Innovators ETF (NYSE:NASA), Intuitive Machines Inc (NASDAQ:LUNR), and Sidus Space Inc (NASDAQ:SIDU).
  • S&P 500 level of 8000 has become the new magnet. However, prudent investors should note there is weakness below the surface.  
    • Only 54% of S&P 500 are in an uptrend.  
    • Over the last month, the only sector to outperform the index is the tech sector. 
  • There is buying coming in for the umpteenth time on Iran peace hopium.  Oil is falling.  As full disclosure, we have a short position in United States Oil Fund LP (NYSE:USO).  In general, a short position works better than an inverse ETF position.
  • There is extremely aggressive buying in the early trade, but the mania stocks are very overbought and thus vulnerable to a major pullback anytime.  In our analysis, a pullback in mania stocks can cause the entire stock market to pull back.  

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

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

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