Key Data Ahead

Please click here for an enlarged chart of Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Note the following:

  • The chart shows that QQQ did not reach the low band of zone 1 (resistance) before pulling back.
  • The chart shows that this morning QQQ is rallying.  Buying in QQQ this morning is almost exclusively coming from the momo crowd.  The momo crowd is repeating its pattern of buying before key events.
  • Two key events are ahead:
    • PCE, the Fed’s favorite inflation gauge, will be released tomorrow at 8:30am ET.  In addition, personal income and spending, GDP, and durable orders will also be released.
    • Nvidia earnings will be released after the regular session close tomorrow.
  • Prudent investors should be highly cognizant of the sharp contrast between the momo crowd and smart money.  The momo crowd almost always aggressively buys before key events.  A key event poses risk to the downside and reward to the upside.  Since the momo crowd does not take risk into account, their logic of buying before the key event is that there may be a potential reward.  On the other hand, smart money focuses on both risk and reward.  For this reason, smart money typically does not buy before a key event.
  • We previously wrote about the U.S. Treasury bond buyback program.  Legendary investor Stanley Druckenmiller is publicly criticizing Treasury Secretary Bessent’s expansion of Treasury buybacks of long bonds.  In our analysis, we agree with Druckenmiller and prudent investors should pay attention to the following:
  • The Treasury appears to be moving beyond its traditional role of maintaining orderly markets.
  • There is no evidence of Treasury market stress that would normally justify this type of intervention.
  • Higher long term yields are sending an important message about persistent inflation, very large federal deficits, rapidly rising federal debt, and enormous government interest expense.
  • The bond market is one of the few remaining forces capable of imposing discipline on fiscal policy.
  • There is also a credibility risk. If the Treasury begins buying bonds because yields are considered too high, investors may reasonably ask where the intervention ends if yields continue rising. That could ultimately require increasingly large purchases and undermine confidence in Treasury debt management.
  • Bond buybacks cannot solve a fiscal problem. Sustainable downward pressure on long term interest rates ultimately requires lower deficits and greater confidence in the long term trajectory of U.S. government finances.

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), Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA)

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

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

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust (NYSE:SPY) and Nasdaq 100 ETF (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 (SLV).  The most popular ETF for oil is United States Oil ETF (USO).

Gold

We previously shared with you that the gold rally was triggered by aggressive buying by Chinese investors.  As gold prices have rallied, Chinese buying is petering out.  In our analysis, now there are first signs that gold may pull back in the short term.  

Bitcoin

Bitcoin (CRYPTO:BTC) briefly rallied above $80K before pulling back.  The rally continues to be fueled by a short squeeze and retail investors buying into the narrative of dollar debasement.  

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.