Treasury Auction Ahead

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 a shallow pullback in the early trade today.
  • RSI on the chart shows the stock market is overbought, but the stock market has room to go higher.
  • The chart shows that volume remains low.  The reason for low volume continues to be aggressive option buying instead of stock buying.
  • There are three new developments related to Iran that are impacting the stock market:
    • After a series of positive statements regarding Iran over the last several days, President Trump is saying the ceasefire is on "life support."  This statement from President Trump is catching the stock market's attention.
    • Iran is sending signals to China for President Trump’s upcoming visit.  The concern is that China may say they are willing to help with Iran if the U.S. agrees to not support Taiwan.
    • Oil is rising.
  • After ignoring the Iran situation for days, the stock market is finally paying attention in the early trade.  This was bringing in selling prior to the Consumer Price Index (CPI) release, especially in overbought semiconductor stocks.
  • CPI came inline.  Here are the details:
    • Headline CPI came at 0.6% vs. 0.6% consensus.
    • Core CPI came at 0.4% vs. 0.4% consensus.
  • In our analysis when looking at inflation data below the surface, the reasons for higher inflation is more than higher gas prices.  So far, the stock market is oblivious, but sometimes there is a delayed reaction. 
  • In the early trade, the momo crowd has been buying stocks on hot inflation data.  The reason is the momo crowd believes that AI is so powerful that inflation does not matter.
  • A key test is ahead with the $42B 10 year Treasury auction. If the auction is weak, smart money will pay attention, but the momo crowd will likely continue to be oblivious.
  • Producer Price Index (PPI) will be released tomorrow at 8:30am ET.
  • So far, 83% of companies that have reported this earnings season have beaten consensus.  Earnings growth rate year-over-year for Q1 is 28.6%.  This is a very strong number, but prudent investors need to keep in mind that a vast majority of this high earnings growth is driven by only a small number of semiconductor and AI related companies.

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 Microsoft Corp (NASDAQ:MSFT).

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

In the early trade, money flows are negative in Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms Inc (NASDAQ:META), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA)

In the early trade, money flows are negative 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.