Bonds Not Euphoric Like Stock Market

Please click here for an enlarged chart of iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT).

Note the following:

  • The chart shows that yesterday, bonds did not share the stock market's euphoria on the Iran deal.  Expectations were that bonds would rally on an Iran deal to the low band of zone 3 (resistance).  As the chart shows, bonds barely budged. The bond market has considered what the stock market has ignored.  Here are the reasons:
    • The deal with Iran is not a definitive agreement with details.  It is an agreement to negotiate a deal – a memorandum of understanding.
    • The thorny issues to negotiate with Iran are still ahead, and there may be setbacks.
    • In spite of all the damage to Iran, Iran is now strategically in a stronger position now than before the war started.
    • The damage done from the Iran war to the world economy will not disappear overnight.
    • Inflationary pressures are not only due to oil but also due to reckless government spending, Fed policies, AI build up, and deglobalization.
  • The Kevin Warsh era begins with the FOMC starting its meeting today.  The rate decision will be announced tomorrow at 2pm ET.
  • The Iran deal will certainly be a relief to FOMC members, but the last Fed minutes show that many FOMC members are not willing to ignore the data and cut rates like President Trump wants.  Warsh may attempt to do what President Trump wants, but he cannot cut rates unless a majority of FOMC members agree.
  • Overnight, Space Exploration Technologies Corp (NASDAQ:SPCX) perpetual futures that are crypto based experienced a vicious short squeeze. As full disclosure, we have a position in SPCX.  SPCX perpetual futures traded as high as $228.74. At that price, SPCX valuation exceeded that of Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft Corp (NASDAQ:MSFT).  While the momo crowd does not care about valuations, prudent investors should consider the following stats:
  • Yesterday, Wall Street was buying SPCX stock to frontrun blind money when SPCX will shortly be included in many indexes.  Companies that construct indexes have changed their rules to fast-track the inclusion of SPCX stock quickly.
  • Blind money is a consistent source of profits for Wall Street.  Wall Street consistently frontruns by buying stocks at lower prices and then sells to index funds at higher prices.  Index fund managers have no choice but to pay the higher prices, and it is not their own money. 
  • Here are the dates when SPCX will be fast-tracked into indexes:
    • Russell US Index Series on June 26, 2026
    • CRSP US Total Market Index on June 26, 2026
    • MSCI Global Standard & Large-Cap Indexes on June 29, 2026
    • Nasdaq 100 Index, represented by QQQ on July 6, 2026
  • In spite of all the efforts, S&P 500 (SPX), represented by ETF SPY, is the exception, sticking to the rules and not fast-tracking SPCX entry.
  • Adding to the exuberance in the stock market is a further drop in oil this morning.  The further drop in oil this morning is triggered by President Trump’s statement that the Strait of Hormuz will be open on Friday.  There are many skeptics, but for the time being, the oil market is believing President Trump.  As a disclosure, we have given signals to take more partial profits on a short position in oil ETF USO and a long position in inverse oil ETF SCO.
  • Yesterday, the euphoria was so extreme that it overcame selling by investors who were selling on the news of the Iran deal.  Expect more investors to continue to sell into the euphoria today.  If momo buying is not able to overcome the "sell the news" selling, the stock market can turn negative.

Japan

Bank of Japan (BOJ) raised its key interest rate by 25 bps to 1.0%.  This was inline with our expectations.  BOJ is open to further hikes.  Prudent investors need to keep an eye on Japan due to the carry trade.  In the carry trade, funds have borrowed hundreds of billions of dollars in Japan and invested in the U.S., lately in the AI trade.

Housing Starts

Housing starts came at 1.177M vs. 1.44M consensus.

Building permits came at 1.413M vs. 1.41M consensus.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, it is important to rise above the noise of daily news on the Mag 7 stocks. 

In the early trade, money flows are positive in Amazon (AMZN).

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

In the early trade, money flows are negative in Apple Inc (NASDAQ:AAPL), Meta Platforms Inc (NASDAQ:META), Microsoft (MSFT), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are mixed 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).

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.