Market Character

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

Note the following:

  • Semiconductors are the leading sector, and semiconductor mania is largely instrumental in driving the stock market higher.  SOXL is the momo crowd’s favorite semiconductor ETF.  For this reason, prudent investors should watch SOXL as a tell for the entire stock market.
  • The chart shows that semiconductors gap opened yesterday on blowout earnings from memory maker Micron Technology Inc (NASDAQ:MU).  Please see yesterday’s Morning Capsule for more.
  • The chart shows that semiconductors approached the low band of zone 1 (resistance).
  • The chart shows that in the early trade this morning, semiconductors have given up all of their Micron gains.
  • In yesterday’s Morning Capsule, we wrote:

Apple Inc (NASDAQ:AAPL) is announcing significant price hikes due to higher memory prices.  It will be interesting to see if consumers easily absorb the price increases or if it results in reduced demand.

  • Microsoft Corp (NASDAQ:MSFT) is also increasing prices on Xbox.
  • Both Apple and Microsoft are increasing prices due to higher memory prices.  Micron’s gain is Apple’s and Microsoft’s pain.
  • The stock market started worrying about how many other companies are going to raise prices due to higher memory prices.  This can lead to both demand destruction and higher inflation.
  • The stock market’s character may have begun to change.  Prudent investors need to pay attention when the market character changes.  However, note that the character change is nascent, and we will be watching to see if it progresses or fades.
    • If Micron had reported the same earnings a month ago, MU stock would have gone much higher than it did yesterday, and SOXL would have likely decisively broken to a new high.  
    • If Apple and Microsoft had increased prices a month ago, this would have triggered buying on the narrative that higher prices means more revenue for Apple and Microsoft; the stock market would have been oblivious to the potential of demand destruction and inflation.  
    • Overnight, there was aggressive selling in South Korea again.  In the overnight trading, selling in South Korea spilled into the U.S. and the selling in the U.S. is persisting this morning.  A month ago, South Korea and Taiwan were following the U.S. market.  Now, the U.S. market is following the South Korea and Taiwan markets. 
  • We have been sharing with you that more memory and semiconductor capacity is coming online.  The stock market is oblivious at this time.  There is speculation that SK Hynix (HXSCL) and Samsung Electronics Co Ltd (OTC:SSNLF) will announce hundreds of billions of dollars of investments next week.  All of these new investments are going to increase supply.
  • There is speculation that OpenAI’s IPO may be delayed.  This is a double edged sword.  On one hand, a delay will reduce the supply of new stock that is coming to the stock market.  On the other hand, a delay may dampen sentiment.
  • We have been sharing with you in advance that quarter end rebalancing may entail over $100B of equity selling.  This selling is beginning to impact the stock market.
  • University of Michigan consumer sentiment was released at 10am ET.
  • Looking ahead, the stock market may get a boost when the month turns as blind money will pour into the stock market on July 1 and July 2.  The seasonality around the July 4 holiday is also positive.

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 (AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Microsoft (MSFT), and Meta Platforms Inc (NASDAQ:META).

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

Bitcoin

Bitcoin (CRYPTO:BTC) is seeing selling.

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.