Deploy Cash And Reduce Hedges

The remaining hedges are still very profitable.  Consider taking additional profits on hedges, especially on any pullback.  Consider deploying cash, especially on a pullback.

Market At Resistance Zone

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 the stock market has staged a spectacular rally on the news of a ceasefire with Iran.
  • The chart shows that the stock market is now at the bottom band of zone 1 (resistance).
  • Of special note is that as the chart shows, during the Iran war, the stock market touched the low band of zone 2 (support); it did not break down through the low band and bounce.  This is more remarkable when you consider our support zone was given well in advance.
  • RSI on the chart shows the stock market has room to go higher.
  • Here is the key question for investors:  Will the stock market get stuck in zone 1 in the near term, or will it break out to the magnet first and then go higher?  Consider not following gurus who claim to know for sure what is going to happen next.  Start with our Second Law of Investing and Trading, "Nobody knows with certainty what is going to happen next in the markets."  What happens next will come down to the following:
    • The ceasefire is fragile.  The statements from Iran and the U.S. as to what has been agreed upon are remarkably different.  Will Iran and the U.S. reach a final agreement?  It will come down to how much President Trump wants to overlook to declare victory.
    • The probability of hostilities resuming again is low but not zero.
    • Despite all the damage Iran has sustained, Iran is in a strategically stronger position now than it was before the war started, provided the current regime does not collapse because of infighting.  If the current regime does not collapse, in the long term, this war is negative for the U.S.  However, if the current regime collapses, the long term will be very positive for the U.S.
    • Important inflation data is ahead.  If inflation is hot, expect Wall Street to dismiss it with claims that the hot inflation was due to the war.  
    • Earnings season is ahead.  Corporations have been raising prices.  As such, expect earnings to be good.  In those cases where earnings are not good, expect Wall Street to rationalize that it is the result of war and issue buy signals.  
  • FOMC minutes will be released today at 2pm ET.
  • PCE, the Fed’s favorite inflation gauge, as well as personal income and spending, initial jobless claims, and GDP will be released tomorrow at 8:30am ET.
  • Consumer Price Index (CPI) will be released Friday at 8:30am ET, followed by University of Michigan Consumer Sentiment at 10am ET.

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.  (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 (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (NYSE:USO).

Oil

API crude inventories came at a build of 3.719M barrels vs. 10.263M barrels previously.

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.