Stock Market Pumps

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 continues to rise.
  • The chart shows volume continues to be low.  The reason is the stock market rally is primarily driven by the momo crowd.  This time, the momo crowd is not buying stocks; they are aggressively buying call options.
  • RSI on the chart says the stock market has room to go higher.
  • Wall Street continues to pump an Iran deal to run up stocks.  Prudent investors should note that it is the umpteenth time the stock market has been bought on an Iran deal.  This is nothing new.  In bull markets, stocks are bought on the same news day after day.
  • The official jobs report, also known as the mother of all reports, is ahead and will be released tomorrow at 8:30am ET.  As is the momo crowd's pattern, the momo crowd is buying stocks ahead of the jobs report. The jobs report presents both upside and downside potential for the stock market.  This is why prudent investors typically do not buy ahead of a jobs report.  In contrast, since the momo crowd does not take risk into account, they buy because they see only upside potential.
  • After the jobs report, China pump is ahead.  President Trump is going to China next week.  Next week, Wall Street will likely pump a China deal in addition to an Iran deal on top of the narrative that semiconductors are going to the moon.
  • Sentiment is extremely positive.  Extreme positive sentiment is a contrary signal, i.e. a sell signal.  It is worth a reminder that sentiment is not a precise timing indicator.  Sentiment can stay extremely positive for a long time.  In The our analysis, for prudent investors, here are the guidelines: 
    • Aggressively buy strategic positions when sentiment is extremely negative.  
    • Be very careful in starting new strategic positions when sentiment is extremely positive.  
    • Use periods of extreme positive sentiment to slowly take partial profits.  
    • Tactical positions can be started during extremely positive sentiment periods because tactical positions have controlled risk with close stops.  
  • Oil is pulling back on the prospect of an Iran deal.  The pullback in oil is causing yields to fall and bonds to rise.  This is giving investors another reason to buy stocks.
  • Initial jobless claims came at 200K vs. 205K consensus.  The stock market likes this number because unlike the prior week, jobless claims did not fall to an inordinately low number.  The number last week was the lowest since 1969.
  • Among after hour earnings today, data center company CoreWeave Inc (NASDAQ:CRWV) is important.  Details of CoreWeave earnings will give insights into the apparently insatiable demand for compute.

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), 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 neutral in Amazon.com, Inc. (NASDAQ:AMZN).

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 (NYSE:SLV).  The most popular ETF for oil is United States Oil ETF (USO).

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.