Weak Treasury Auction

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 continued buying after the stock market previously hit zone 1 (support).
  • As described in yesterday's Morning Capsule, there was a deep excursion inside zone 1 in the premarket before President Trump's post rallied the stock market.
  • This morning, there is buying in the stock market on President Trump declaring victory in the Iran war.  President Trump said, "You know, I don’t like to say this, we’ve won this – this war has been won."
  • From our sources, Iran has rejected the ceasefire proposal and is calling talks with the U.S. "illogical."
  • So far, the markets believe President Trump, not Iran.
  • The U.S. has submitted a 15-point plan.  The U.S. demands are maximalist.  Here are the key demands:
    • No nuclear enrichment
    • Dismantling of nuclear facilities
    • Very limited missile production
    • No support for proxies
    • Joint control of Strait of Hormuz
  • It is not clear who the U.S. is negotiating with on the other side.  Iran continues to say it is not in talks with the U.S.  Iran has also put out maximalist demands.  Here are the main demands:
    • Reparations for the damage
    • Guarantee of no future attacks
    • No sanctions
    • No U.S. bases in the area
    • Iran charging for passage through the Strait of Hormuz just like Egypt charges for passage through the Suez Canal
  • There is conflicting information, and it is hard to know what is real and what is a chess game.  In our analysis, in spite of conflicting information, the scenario with the highest probability remains a ceasefire deal that is minimalist to allow for more time for more negotiations.  
  • There are reports that U.S. allies in the Gulf are concerned that the U.S. will give up too much, in its eagerness to extract itself from the situation, and leave Iran as a more potent adversary.
  • In our analysis, when a deal is reached, the highest probability scenario for the reaction of the markets is for the markets to not care about the merits of any deal and just sell oil and buy stocks, gold, silver, and bonds.    
  • What happens if there is no deal and the war continues?  At least for now, hopium has taken over, and the markets are not thinking about this possible scenario.  
  • It is very important for investors to remember 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."
  • Prudent investors should pay attention to a reality check that happened yesterday.  Two-year Treasury auctions are normally strong because there is not much duration risk.  In an aberration, yesterday's auction was very weak.  Investors should pay close attention to upcoming auctions.  Here are the results from yesterday's auction:
    • $69B 2-year Treasury note auction
      • High yield: 3.936% (When-Issued: 3.918%)
      • Bid-to-cover: 2.44
      • Indirect bid: 59.4%
      • Direct bid: 16.5%

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 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).

Oil

API crude inventories came at a build of 2.3M barrels vs. a consensus of a draw of 1.3M barrels

Bitcoin

Bitcoin (CRYPTO: BTC) is range bound.

What To Do Now

On March 23, the call was: Give precedence to the return of capital over the return on capital. 

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.