Euphoric Stock Market

Please click here for an enlarged chart of United States Oil ETF (NYSE:USO).

Note the following:

  • The chart shows oil is falling about 5% on the U.S. Iran deal.  The deal appears to lift the U.S. blockade, open the Strait of Hormuz, and extend the ceasefire for 60 days.  The deal appears to defer to later negotiations difficult issues such as Iran's nuclear capabilities.  The deal is expected to be signed on Friday in Switzerland.
  • The stock market reaction to the Iran deal is mostly euphoria.  Prudent investors need to remember that the stock market has gone up a lot since the Iran war started and also the stock market previously went up umpteen times on hope of a deal.  For these reasons, in the middle of the euphoria in the early trade, prudent investors need to be alert to a potential ‘sell the news' reaction later on.
  • The stock market in countries that will benefit from lower oil prices are jumping.  As examples, the stock in Japan rose 5% and the stock market in South Korea rose 5.2%.  As full disclosure, iShares MSCI Japan ETF (NYSE:EWJ) and Ishares Msci South Korea ETF (NYSE:EWY) are in our portfolios.
  • As a disclosure, ZYX Short has a short position in oil ETF USO and also short positions in stocks of a fertilizer company and a chemical company that had run up from the Strait of Hormuz closing.  Smart money attempts to profit from rising prices as well as falling prices.
  • Adding to the euphoria is a post from Elon Musk about Space Exploration Technologies Corp (NASDAQ:SPCX).  Musk says, "I think SpaceX might be able to reach approximately $1T revenue in 2030." As a reference, SpaceX had revenue of $18.67B in 2025, and the projection for 2026 is $25B.  Musk's post is significantly more optimistic than the prior extremely bullish estimates.  Goldman Sachs Group Inc (NYSE:GS) and Morgan Stanley (NYSE:MS) were the underwriters of the SpaceX IPO.  Goldman Sachs projected 2030 revenue of $474B and Morgan Stanley projected 2030 revenue of $330B.
  • The natural winners from oil falling are airlines such as American Airlines Group Inc (NASDAQ:AAL), Delta Air Lines Inc (NYSE:DAL), and United Airlines Holdings Inc (NASDAQ:UAL) as well as cruise lines such as Carnival Corporation Ltd (NYSE:CCL) and Royal Caribbean Cruises Ltd (NYSE:RCL).  To regular readers of the Morning Capsule, it will not come as a surprise that in the early trade the biggest winners from the Iran deal are not oil sensitive stocks but semiconductors such as Micron Technology Inc (NASDAQ:MU), SanDisk Corp (NASDAQ:SNDK), Intel Corp (NASDAQ:INTC), and Advanced Micro Devices Inc (NASDAQ:AMD).  As we have shared with you before, the pattern is consistent in that semiconductor stocks are bought on the narrative that semiconductors have nothing to do with oil and Iran when there is bad news from Iran and semiconductors are bought when there is good news from Iran on the exuberance it creates.
  • Triple witching is ahead.  In triple witching, stock index futures, options on indexes, and options on stocks expire on the same day.  It appears that the positioning of market makers is such that coming into triple witching week they will buy stocks when stocks start moving higher and sell stocks when they start moving lower.  The result may be exaggerated moves.

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), 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 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 seeing buying.

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.