Blowout Jobs Report

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

Note the following:

  • This article is about the big picture, not an individual stock. The chart of the leveraged semiconductor ETF SOXL is being used to illustrate the point.
  • Semiconductor mania is one of the three manias driving the stock market higher. Semiconductor mania has been the main factor driving the stock market higher.
  • The chart shows a drop in SOXL after Broadcom Inc (NASDAQ:AVGO) earnings came well below whisper numbers. Please see yesterday's article for details.
  • The chart shows extremely aggressive buying by the momo crowd on the dip in semiconductors. After a sector has run up and a leading company in that sector disappoints, the kind of aggressive buying shown on the chart is unprecedented. The momo crowd just did not care about earnings. To the momo crowd, every dip is a buying opportunity, especially in semiconductors.
  • The chart shows that extremely aggressive momo crowd buying led SOXL to recover most of the losses after AVGO earnings. 
  • Investors in Asia were not swayed by the momo crowd’s extremely aggressive buying in semiconductors.
  • The chart shows SOXL started dropping after the regular session yesterday, after indications emerged that there would be selling in Taiwan and Korea. The chart shows that as Taiwan and Korea started trading lower, more selling came into SOXL after hours.
  • Taiwan and South Korea are two markets that have been extremely strong. Taiwan Semicndctr Mnufctrng Co Ltd (NYSE:TSM) manufactures the most advanced AI semiconductors in Taiwan. Two big semiconductor memory makers, Samsung Electronics Co Ltd (OTC:SSNLF) and SK Hynix (HXSCL), are based in South Korea. The stock market in South Korea fell by 5.4% overnight. The Taiwan stock market fell by 1.33%. As full disclosure, we have a position in Korea ETF EWY long from $48.60. It is trading at $191.12 as of this writing.
  • There is a big setback for SPCX. S&P has decided not to fast-track the inclusion of SPCX in the S&P 500 after NASDAQ fast-tracked SPCX into the NASDAQ 100. The speculation was that the S&P 500 would do the same.  This is a big setback because inclusion in the S&P 500 would have brought in blind money to buy huge quantities of SPCX without considering price or performing any analysis. To make matters worse, Wall Street would have front-run the inclusion by buying SPCX in advance, causing the SPCX price to go even higher. Then Wall Street would have sold SPCX at super-elevated prices to index funds.  Passive fund managers do not care about the price they pay because their mandate is to buy whatever is included in the index.
  • The Jobs Report is a blowout. Here are the details:
    • Headlines nonfarm payrolls came at 178K vs 196K consensus.
    • Private nonfarm payrolls came at 120K vs 89K consensus.
    • Average hourly came at 0.3% vs 0.3% consensus.
    • Unemployment came at 4.3% vs 4.3% consensus.
  • In our analysis after this Jobs Report, now the probability of a rate cut in Kevin Warsh’s first FOMC meeting is only 10%.  The speculation has been that Kevin Warsh would manage to get a rate cut to appease President Trump, even though the data does not support it.
  • In our analysis, the probability of a rate hike this year is 60%.

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 Tesla Inc (NASDAQ:TSLA), Apple Inc (NASDAQ:AAPL), and Microsoft Corp (NASDAQ:MSFT).

In the early trade, money flows are negative in Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corp (NASDAQ:NVDA), Alphabet Inc Class C (NASDAQ:GOOG), and Meta Platforms Inc (NASDAQ:META).

In the early trade, money flows are negative 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 (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.