Buying On Hopium

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

Note the following:

  • Semiconductors reflect the AI trade, and SOXL is the momo crowd’s favorite.
  • The chart shows SOXL bounced above the top band of zone 3 (support) on Friday due to triple witching buying.  Friday also saw aggressive call buying in several semiconductor stocks including Sandisk (SNDK) and Micron (MU).
  • The chart shows SOXL is jumping again in the early trade on very aggressive buying.
  • There is very aggressive buying in the stock market this morning, especially in the AI trade.  There are five main factors:
    • Hopium about Iran
    • Hoping about China
    • Bitcoin jumping above $85K
    • Greenland deal
    • Anthropic IPO
  • President Trump is likely to meet Gulf leaders in New York this week.  The stock market is assuming that the talks will lead to a resolution of the Iran war.  Prudent investors should note that Iran is not part of these talks.  Iran has laid out its demands to end the war, and the U.S. is unlikely to accept Iran’s demands.
  • We previously shared with you that a Houthi attack had shut down the East-West Pipeline in Saudi Arabia.  Saudi Arabia had been using the pipeline to bypass the Strait of Hormuz to send oil from its eastern fields to the Red Sea.  This morning, there is hopium that Saudi Arabia could repair the pipeline soon.  In our analysis, prudent investors should note that technical hurdles remain and Houthis can attack the pipeline again at any time.  
  • President Xi of China will be meeting President Trump.  Secretary Bessent says he has had productive talks with his counterpart ahead of the summit.  In our analysis, prudent investors should note that there are tough issues regarding Taiwan, trade, and AI.  Irrespective of this morning’s hopium, China is going to continue its quest to get ahead of the U.S. in AI and to replace the U.S. as the world’s superpower.  
  • Bitcoin jumping over $85K is creating significant positive sentiment that is resulting in buying in tech stocks.  In our analysis, a large number of investors who aggressively buy bitcoin also aggressively buy speculative tech stocks.  Further, prudent investors should note the jump in bitcoin is primarily the result of a short squeeze.  Short squeezes tend to end.  
  • President Trump has been wanting to make Greenland part of the U.S.  Now, the matter has been resolved.  There is a deal that falls short of a takeover but allows the U.S. to expand its military presence in Greenland and permanently bars China and Russia from investing in Greenland.  Shares of Greenland related stocks such as Greenland Energy Co (NASDAQ:GLND), Greenland Mines Ltd (NASDAQ:GRML), and Critical Metals Corp (NASDAQ:CRML) are jumping.
  • Anthropic’s IPO now appears to be scheduled for November.  This is generating additional enthusiasm for AI stocks.
  • Nasdaq quarterly rebalancing that takes effect today increases Space Exploration Technologies Corp (NASDAQ:SPCX) weighting to 2.82% from 1.28%.  This is causing index funds to buy SPCX stock.

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), 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 Apple Inc (NASDAQ:AAPL).

In the early trade, money flows are positive 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 (BTC) is seeing buying.

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.