CPI Saves Stock Market

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

Note the following:

  • The semiconductor mania has been largely responsible for levitating the entire stock market.  For this reason, smart money keeps a close eye on semiconductors.
  • The chart shows that yesterday leveraged semiconductor ETF SOXL started the day higher than the high of the prior day.  This brought in aggressive buying in the premarket yesterday.
  • The chart shows yesterday leveraged semiconductor ETF SOXL fell right from the opening of the regular session.  The proximate reason was chatter about mounting tension between China and Taiwan.  The most advanced semiconductors are manufactured in Taiwan, and a significant part of the supply chain for semiconductors is in Taiwan and China.  We previously highlighted that China considers Taiwan part of China, and there is an ever present risk of China accomplishing its objective of bringing Taiwan in its fold by force.
  • The chart shows that yesterday SOXL fell to the low band of zone 1 (support).
  • The momo crowd aggressively bought the dip yesterday causing SOXL to close above the high band of zone 1.
  • Prudent investors should note the following:
    • Yesterday's low in semiconductors, shown on the chart, undercut Friday's low.  
    • As shown on the chart, there was heavier volume both during yesterday's selloff and Friday's selloff in semiconductors.
    • Note that SOXL traded as high as $231.01 and as low as $157.56 yesterday – a very wide range for one day of trading.
  • The chart shows RSI was turning up yesterday, but now it is turning down.
  • In our analysis, the tell for the entire stock market is if semiconductors can hold above the low band of zone 1 shown on the chart.  
  • As the chart shows, before the release of Consumer Price Index (CPI) data, semiconductors were seeing heavy selling.  After release of CPI data, semiconductors immediately saw heavy buying.
  • There was aggressive selling in the stock market in the early trade prior to the release of CPI data.  Immediately after the release of CPI data, aggressive buying came in the stock market.  The reason is less than expected Core CPI.  The narrative is that headline inflation will come down after the Iran conflict is resolved.  Here are the details:
    • Headline CPI came at 0.5% vs. 0.5% consensus.
    • Core CPI came at 0.2% vs. 0.3% consensus.
  • In our analysis, this CPI data eliminates any probability of a rate hike in the upcoming Fed meeting.  
  • Produce Price Index (PPI) will be released tomorrow at 8:30am ET.
  • The Iran truce has become more fragile after Iran shot down a U.S. helicopter.  The U.S. retaliated in a limited fashion, and Iran responded.  President Trump is saying Iran "took too long" in negotiations and will "pay the price."
  • Prudent investors should note oil has nudged up only a little after falling yesterday, before the confirmation that Iran had shot down a U.S. helicopter.  This indicates that the oil market continues to believe that neither side wants war.
  • Many less-informed investors are getting excited that SpaceX  (SPCX) subscription interest reportedly stands at $250B for a $75B IPO.
  • Prudent investors should note, many recent hot IPOs, such as Cerebras Systems Inc (NASDAQ:CBRS), have been over 20x oversubscribed.  However, SpaceX is unique in that it is the biggest IPO in history, so 20x may not be a fair benchmark.  But, 3x–4x oversubscription is not automatically bullish.
  • In the middle of all of the bullishness about the SpaceX IPO, bears are promoting a narrative that the SpaceX IPO marks a top in the stock market. 
  • In our analysis, how SPCX stock trades post IPO will impact the entire stock market.  

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 neutral in Apple Inc (NASDAQ:AAPL).

In the early trade, money flows are negative in 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 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 (NYSE:USO).

Oil

API crude inventories came at a draw of 9.119M barrels vs. a consensus of a draw of 3.4M barrels.

Bitcoin

Bitcoin (CRYPTO: BTC) is seeing selling.

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.