Dip In Support Zone And Bounce

Please click here for an enlarged 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 that this morning the stock market dipped deeper into our Support Zone (zone 1).
  • The chart shows a huge bounce from the lows on President Trump's pivot as explained below.
  • On Saturday evening, President Trump had given a 48 hour ultimatum for Iran to open the Strait of Hormuz or the U.S. would bomb Iran's power plants.
  • Iran responded by saying if its power plants were to be bombed, then Iran would close the Strait of Hormuz by mining it and attack the energy infrastructure and water desalination plants of U.S. allies.
  • Last night in Asia and earlier in the U.S., margin calls were hitting.  Pressure from margin calls were especially severe in gold and silver.  There was also heavy selling in gold and silver from the Middle East, Iran, India, and China. 
    • Gold dipped from above $5600 to as low as $4100 this morning.
    • Silver dipped from above $120 to as low as $61.21 this morning.
  • This morning, President Trump decided to postpone bombing Iran's power plants for five days.  President Trump’s action has created an extreme whipsaw in the markets.  To fully grasp the whipsaw, take a close look at the ranges so far today:  
    • S&P 500 futures traded as low as 6483 and as high as 6748.
    • Oil futures traded as low as $84.37 and as high as $101.67.
    • Gold futures traded as low as $4100 and as high as $4537.
    • Silver futures traded as low as $61.21 and as high as $69.98.
    • Bond futures traded as low as 111'25 and as high as 113'14.
  • Even though there is extreme bullishness in the stock market as of this writing and in our analysis the bullishness is justified, prudent investors need to be aware that war is full of deception.  Here are the two scenarios to consider:
    • President Trump is postponing the bombing so that there is enough time to position Marines to take over Kharg Island.  If President Trump were to order the bombing of Iran's power plants today, U.S. forces are not positioned to handle Iran's counter offensive.  
    • Iran is agreeing to talks so that it has more time to mine the Strait of Hormuz.  
  • As of this writing, President Trump is saying, "Iran wants to make a deal badly, could be within 5 days or sooner."
  • If there is a deal with Iran, expect a rip-roaring rally in the stock market, gold, silver, and bonds and a drop in oil.  If there is no deal, the U.S. takes over Kharg Island, and Iran mines the Strait of Hormuz, expect the reverse.
  • Remember our principle: give precedence to the return of capital over the return on capital. 

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 extremely positive in S&P 500 ETF (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.