Secret Iran Outreach

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 the stock market made a lower low yesterday.
• The chart shows yesterday the stock market rallied from the lows and closed much higher than the open on President Trump's safe shipping plan.
• The chart shows this morning in the early trade, the stock market went higher on report of a secret Iran outreach.
• The rebound in the stock market yesterday was prompted by President Trump’s promise of safe shipping through the Strait of Hormuz. Iran has declared the Strait of Hormuz closed and shipping traffic through the Strait of Hormuz has dwindled to almost nothing.  Commercial insurance carriers have stopped providing insurance to ships traveling through the Strait of Hormuz.
• When President Trump said that the U.S. Navy could escort ships and President Trump ordered the United States Development Finance Corporation (DFC) to offer reasonably priced insurance to ships traveling through the Gulf, the momo crowd aggressively bought stocks.  There was no smart money buying.
• As usual, the momo crowd is oblivious, but prudent investors should pay attention to flies in the ointment:
  • It is not clear if DFC has the authority to provide insurance to all ships.
  • Providing insurance to ships in a war zone is extremely expensive.  It is not clear if DFC has the resources to provide such insurance.
• Ship owners are savvy.  Expect ship owners to not take President Trump on his word, at least initially.
• Logically, due to the uncertainties described above, the stock market should not have rallied as much as it did from the lows yesterday.  However, the stock market is not about logic.  It is about the momo crowd wanting an excuse to buy the tiniest dip.  When the stock market starts moving in one direction, Wall Street machines jump in the same direction, exaggerating the move.
• In the early trade, initially the stock market was seeing selling, but then a report came that Iran has secretly reached out to find an off-ramp.  This report led to aggressive buying in the stock market.
• In our analysis, it is not clear how credible the report of Iran's outreach is, and further, it is not clear that President Trump is ready to take an off-ramp.
• Complicating the situation is what Iran may consider as an acceptable off-ramp may be very different from what President Trump may consider as an acceptable off-ramp.
• Some political experts (we are not one) are suggesting that President Trump has his eye on the midterm elections and cannot afford rising gas prices, rising inflation, and an ongoing war.  For these reasons, these experts think that President Trump may find a way to declare victory without achieving his objectives.
• Expect TACO (Trump Always Chickens Out) traders to aggressively buy stocks if the foregoing analysis of some political experts becomes the narrative in the stock market.
• In yesterday's Morning Capsule, we shared with you the importance of the South Korean stock market to the U.S. stock market.  Overnight, South Korean stocks crashed again, falling 12%.  However, this morning Ishares Msci South Korea ETF (NYSE:EWY) is recovering on the report of Iran outreach.
• ADP is the largest private payroll processor in the country.  ADP uses its data to provide a glimpse of the official jobs report that will be released on Friday at 8:30am ET.   ADP Employment Change came at 63K vs. 42K consensus.
• The Fed's Beige Book will be released at 2pm ET.

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), Meta Platforms Inc (NASDAQ:META), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are neutral in Apple Inc (NASDAQ:AAPL), Alphabet Inc Class C (NASDAQ:GOOG), and 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 (NYSE:GLD).  The most popular ETF for silver is iShares Silver Trust (NYSE:SLV).  The most popular ETF for oil is United States Oil ETF (NYSE:USO).

Gold

The momo crowd is like a yoyo in gold in the early trade, and this behavior is reflected in gold ETF (GLD), silver ETF (SLV), VanEck Gold Miners ETF (NYSE:GDX), and Global X Silver Miners ETF (NYSE:SIL).  Smart money is inactive in the early trade.

Oil

API crude inventories came at a build of 5.6M barrels vs. a consensus of a build of 2.2M barrels.

Bitcoin

Bitcoin (CRYPTO: BTC) is seeing aggressive buying on the report of Iran outreach and is now trading above $70K.  This demonstrates once again that bitcoin is not a hedge but a speculative risk asset.

What To Do Now

Consider continuing to hold good, very long term, existing positions and add tactical positions based on signals. 

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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.

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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.