Pressure From Oil

Please click here for an enlarged chart of Direxion Daily Semiconductor Bull 3X ETF (NYSE:SOXL).

Note the following:

  • The chart shows the semiconductor mania is backtracking.
  • The chart shows our signal to take partial profits on VanEck Semiconductor ETF (NASDAQ:SMH) yesterday in the premarket near the top before the pullback.  There were also signals from us to take partial profits on Intel Corp (NASDAQ:INTC) yesterday and on Advanced Micro Devices Inc (NASDAQ:AMD) on Friday.
  • RSI on the chart shows SOXL is no longer overbought.  When anything becomes as overbought as semiconductors had been, there is usually a trigger that becomes an excuse for a pullback.
  • The excuse this time is a report that OpenAI, maker of ChatGPT, is not meeting its internal targets for revenues and users.  OpenAI is denying the report.  This report is also negatively impacting stocks closely tied to OpenAI such as Oracle Corp (NYSE:ORCL), CoreWeave Inc (NASDAQ:CRWV), and SoftBank Group Corp – ADR (OTC:SFTBY).
  • A bigger mania than semiconductors has been in optical stocks.  Earnings from Corning Inc (NYSE:GLW) and Amkor Technology Inc (NASDAQ:AMKR) are negatively impacting other optical related stocks such as Marvell Technology Inc (NASDAQ:MRVL), Applied Optoelectronics Inc (NASDAQ:AAOI), Ciena Corp (NYSE:CIEN), Coherent Corp (NYSE:COHR), and Lumentum Holdings Inc (NASDAQ:LITE).
  • The FOMC meeting starts today.  The Fed will announce its rate decision tomorrow at 2pm ET, followed by Fed Chair Powell's press conference at 2:30pm ET.
  • Oil is rising, putting pressure on the entire stock market in the early trade, but in our analysis, a new major oil-related development is positive for the stock market in the long run.  Please see the oil section below.

Japan

The Bank of Japan (BOJ) left its key interest rate unchanged at 0.75%.  This is inline with consensus, but in our analysis, prudent investors should pay attention to the fact that three out of nine members voted for a hike.  This indicates an interest rate hike in Japan may be ahead.  Interest rates in Japan are important because in the carry trade, funds have borrowed billions of dollars in Japan and invested in the U.S., lately in the AI trade.

Europe

New data released by the European Central Bank (ECB) shows that consumer expectations for year ahead inflation jumped to 4.0% from 2.5%.  Three year inflation expectations jumped to 3.0% from 2.5%.  The ECB survey is now projecting the economy to contract by 2.1% from prior projection of 0.9% contraction.  This data is from a survey.  Survey data does not always turn into reality.  However, prudent investors should note that if this data turns into reality, this will be the start of stagflation.  

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).

In the early trade, money flows are negative in 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 negative in SPDR S&P 500 ETF Trust (NYSE: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

Oil has been rising as President Trump does not like Iran's proposal.  Iran's proposal is to open the Strait of Hormuz but delay any negotiations on nuclear.  The main reason President Trump has given for attacking Iran is to make sure Iran does not develop a nuclear bomb.

In an important development, U.A.E. is leaving OPEC and OPEC+ to pursue a new strategy.  U.A.E has been the third largest oil producer and an important member of OPEC for six decades.  In our analysis, this is a negative development for oil and a positive development for the stock market in the long term.  

Bitcoin

Bitcoin (CRYPTO: BTC)is range bound.

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.