Egypt Fear

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

Note the following:

  • Semiconductors are the leading sector that drove the stock market higher.  SOXL is the momo crowd’s favorite semiconductor ETF.
  • The chart shows that from the recent high made in June, SOXL lost 70% to yesterday’s close.
  • The chart shows SOXL made a lower low yesterday.
  • The chart shows selling in SOXL yesterday was on heavy volume.  The reason for the heavy volume was that many momo crowd accounts were hit with margin calls and were forcibly liquidated.
  • RSI on the chart shows SOXL is moving out of the oversold zone.  This sets SOXL up for a potential bounce unless there are more margin calls and more momo accounts are liquidated.
  • A big driver of the stock market has been demand for DRAM memory.  Most of the DRAM market is controlled by three companies: Micron Technology Inc (NASDAQ:MU), SK Hynix Inc – ADR (NASDAQ:SKHY), and Samsung Electronics Co Ltd (OTCPK:SSNLF).  Previously, Micron reported outstanding earnings, better than whisper numbers, but MU stock fell.  SK Hynix reported earnings lower than whisper numbers and consensus, and the stock fell.
  • Overnight, Samsung is reporting outstanding earnings.  Here are the details:
    • Samsung net profit for the quarter came at 71.625T South Korean won vs. 70.17T won consensus.  This is about a 1300% rise year-over-year.
    • Q2 revenue came at 171.5T won vs. 74.6T won last year.
    • Samsung expects memory demand to stay robust to 2028.
  • The chart shows that SOXL is moving up in the early trade this morning.  The trigger is outstanding Samsung earnings.
  • Microsoft Corp (NASDAQ:MSFT) reported outstanding earnings better than the consensus.  Here are the details:
    • Microsoft Q4 EPS came at $4.74 vs. $4.24 consensus.
    • Microsoft Q4 revenue came at $90.01B vs. $87.63B consensus.
    • Microsoft sees fiscal Q1 revenue of $89.85B – $90.95B vs. $89.69B consensus.
    • Microsoft sees 2026 capex of $175B vs. $190B prior. This is due to an accounting change of estimating the useful life of datacenters from 15 years to 25 years.
    • Azure revenue exceeded $100B for the first time.
    • Microsoft 365 Copilot now has 30M paid users.
  • Meta Platforms Inc (NASDAQ:META) earnings disappointed.  Here are the details:
    • Meta reported EPS of $6.18 vs. $7.22 consensus.
    • Meta reported revenue of $60.8B vs. $60.29B consensus.
    • Meta sees Q3 revenue of $61B – $64B vs. $63.24B consensus.
    • Meta sees capex for the year of $130B – $145B.
  • The stock market is oblivious but prudent investors should pay attention to a drone attack on two ships near Suez Canal in Egypt.  This is raising the prospect of a wider war.  
  • Prudent investors should especially note that the 30 year bond yield earlier today hit 5.244%.  This is the highest yield since 2007.  After lower PCE data, the yield has pulled back to 5.211% as of this writing.  One of the concerns is that if the 30 year yield continues to rise and the Fed does not raise rates, the Fed will lose credibility.  
  • PCE is the Fed’s favorite inflation gauge.  PCE is contained.  Here are the details:
  • PCE came at -0.1% vs. -0.1% consensus.
  • Core PCE came at 0.1% vs. 0.2% consensus.
  • GDP data is concerning.  Here are the details:
    • Q2 GDP Adv. came at 1.5% vs. 2.3% consensus.
    • Q2 Deflator Adv. came at 6.3% vs. 3.7% consensus.
  • The U.S. economy is 70% consumer based.  For this reason, prudent investors pay attention to personal income and personal spending.  Just released personal income and spending data is weaker.  Here are the details of the new personal income and spending data:
    • Personal income came at 0.2% vs. 0.3% consensus.
    • Personal spending came at 0.3% vs. 0.4% consensus.
  • Initial jobless claims came at 197K vs. 203K consensus.  This indicates the jobs picture continues to stay strong in spite of AI related layoffs.

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 Amazon.com, Inc. (NASDAQ:AMZN), Microsoft (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).

In the early trade, money flows are negative in Apple Inc (NASDAQ:AAPL) and Meta (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 (NYSE:GLD).  The most popular ETF for silver is iShares Silver Trust (NYSE: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.