Strong Jobs Report

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 as of this writing the stock market is going higher after the jobs report.
  • RSI on the chart shows there is room for the stock market to go higher.
  • The chart shows volume continues to be low.  As we have previously shared with you, the reason for low volume is the momo crowd buying options, not stocks.
  • Two manias occurring simultaneously are driving the stock market.
    • The first is the semiconductor mania.  The momo crowd believes semiconductor demand will continue forever.  The momo crowd is buying semiconductors based on the demand today and not thinking about demand tapering off in 2028.  The data just released from Taiwan Semicndctr Mnufctrng Co Ltd (NYSE:TSM), the largest manufacturer of advanced AI semiconductors for NVIDIA Corp (NASDAQ:NVDA) and Advanced Micro Devices Inc (NASDAQ:AMD), saw April revenue down 1.1% from March.  The data shows TSM's growth rate is slowing.  As you would expect in any mania, the momo crowd is oblivious.
    • The second mania is reckless call buying.  Call buying is hitting a record. When the stock market starts moving up even slightly, market makers who sold the calls to the momo crowd are forced to buy stocks to hedge.
  • In our analysis, manias always go much farther than any rational investor would think.  Historically, most money is made in the late stages of a mania.  In the end, all manias unwind, hurting a vast majority of investors.  At this time, it is extremely important to have access to a reliable, objective source of analysis with a long proven track record.  
  • Yesterday, the U.S. bombed Iran as a retaliatory strike after U.S. Navy ships came under fire from Iran.   President Trump called it a "love tap."  President Trump said the ceasefire was still in effect.  In our analysis, the stock market take from the incident is to ignore any negative development in Iran.
  • After the love tap, Iran launched a missile and drone attack on the U.A.E.  Instead of selling, the news brought in buying in stock futures.
  • Prudent investors need to know the change in the pattern.  Before yesterday, a skirmish in the Middle East would cause an immediate, brief dip in the stock market.   Now, a skirmish in the Middle East brings buying into the stock market.  
  • The jobs report is known as the mother of all reports due to its importance.  Here are the details:
    • Non-farm payrolls came at 115K vs. 67K consensus.
    • Non-farm private payrolls came at 123K vs. 60K consensus.
    • Unemployment rate came at 4.3% vs. 4.3% consensus.
    • Average work week came at 34.3 vs. 34.2 consensus.
    • Average hourly earnings came at 0.2% vs. 0.3% consensus.
  • In our analysis, this jobs report is strong.  This data, along with other data, shows that monetary conditions are too easy.  If the data continues to stay strong, it raises the specter of an interest rate hike.  Of course, this is going to put incoming Fed Chair Warsh in a difficult position – President Trump expects him to cut rates, but there is a high probability that the data may argue for a rate hike.  
  • Normally, this jobs report would have caused a stock market sell off because the stock market wants rate cuts and this jobs report is in favor of a rate hike.  These are not normal times – the stock market is in the middle of a double mania.  Today, buying came in after the strong jobs report.  
  • Prudent investors should note the pattern – all news, good or bad, brings in buying.  This is the result of extreme positive sentiment.  

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 Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corp (NASDAQ:NVDA), Tesla Inc (NASDAQ:TSLA), and Apple Inc (NASDAQ:AAPL).

In the early trade, money flows are neutral in Alphabet Inc Class C (NASDAQ:GOOG) and Meta Platforms Inc (NASDAQ:META).

In the early trade, money flows are negative in Microsoft Corp (NASDAQ:MSFT).

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).

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.