Positive Positioning

Please click here for a chart of SPDR S&P 500 ETF Trust (NYSE:SPY) which represents the benchmark stock market index S&P 500 (SPX).

Note the following:

  • The chart shows the stock market is rallying this morning.
  • RSI on the chart shows that the stock market had previously become oversold.  Now, the chart shows RSI is rising, and the stock market is no longer oversold.
  • The chart shows the major support zone (zone 1).  This support zone will come into the picture if the Iran war continues longer or oil infrastructure is damaged.
  • Over the weekend, there were a lot of concerns that due to the U.S. bombing Kharag Island, Monday could be a bloodbath in the stock market.  However, those thinking of a bloodbath missed the point – the U.S. did not bomb oil infrastructure on Kharag Island and limited bombing only to military sites.  The oil terminal on Kharag Island carries 90% of Iran's oil exports.
  • On Sunday evening, oil futures opened higher and stock futures opened lower.  Oil futures quickly gave up gains.  As oil futures gave up gains, stock futures rose.
  • Buying in the stock market and selling in oil that started on Sunday evening has become more aggressive this morning in the early trade.
  • Wall Street positioning remains positive in the stock market.  
  • Sentiment is very positive as Wall Street believes TACO (Trump Always Chickens Out) is around the corner.    
  • Last week, President Trump said that the Iran war was a "little excursion” and would be over soon.  However, Iranians appear to believe a longer war is in their best interest.  The prevailing consensus on Wall Street is that continued heavy bombing will help President Trump find an off ramp quickly.
  • It is important for investors to not buy into one scenario but instead to look at multiple scenarios.  
  • In The our analysis, here are the major scenarios:
    • The Iran war ends soon – 55% probability
    • The Iran war continues longer – 25% probability
    • Other scenarios such as lower level war – 20% probability
  • Investors should start with our Second Law of Investing and Trading, which states, "Nobody knows with certainty what is going to happen next in the markets" and follow with our Third Law, which states, "Making investing and trading decisions based on probabilities is the only realistic and profitable approach."
  • NVIDIA Corp (NASDAQ:NVDA) GTC starts today.  In the past, Nvidia GTC has triggered major moves.  This time the bar is much higher for Nvidia GTC.  Nvidia plans to introduce a new inference chip at GTC this week.  This is critical because Nvidia became the largest company in the world on the strength of its chips being used for AI training.  As we go forward, inference will become extremely important.  Also expect announcements related to optical networking and use of optics in semiconductors.  Stocks of interest are Applied Optoelectronics Inc (NASDAQ:AAOI), Amkor Technology Inc (NASDAQ:AMKR), nLight Inc (NASDAQ:LASR), Corning Inc (NYSE:GLW), Himax Technologies Inc (NASDAQ:HIMX), Marvell Technology Inc (NASDAQ:MRVL), Coherent Corp (NYSE:COHR), and Lumentum Holdings Inc
  • (NASDAQ:LITE).
  • Producer Price Index (PPI) will be released on Wednesday at 8:30am ET.
  • The FOMC will announce its rate decision on Wednesday at 2pm ET followed by a press conference from Fed Chair Powell at 2:30pm ET.
  • Complicating the matter is option expiration on Friday.  Over the last several months, option expiration has exerted a positive influence on the stock market in the expiration week.  This time, there are factors that can exert both negative and positive influences in the 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 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 (NVDA), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are positive in S&P 500 ETF (SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Momo Crowd And Smart Money In Stocks

The momo crowd is buying stocks in the early trade.  Smart money is inactive in the early trade.

Note: Smart money often sells into the strength generated by momo crowd buying and buys into the weakness generated by momo crowd selling.  Over a long period of time, investors come out ahead by adopting smart money's ways.  The exception is in a raging bull market – for very short term trades, consider following the momo crowd and not smart money.

Gold

The momo crowd is like a yoyo in gold in the early trade, and this is reflected in gold ETF (GLD), silver ETF (SLV), VanEck Gold Miners ETF (NYSE:GDX), and Global X Silver Miners ETF (NYSE:SIL).  Smart money is inactive in the early trade.

Bitcoin

Bitcoin (CRYPTO: BTC) is seeing buying on the hopium that the Iran war will end soon and "risk on" will become the trading theme.    

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.