Global Bond Selloff Dents Market Bullishness — Treasury Auction To Test Sentiment
Treasury Auction Will Be The Test 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 new all time high yesterday and closed at an all time closing high. The chart shows that after going above the top band of zone 1 (resistance), yesterday the stock market pulled back to close near the top band of zone 1. The chart shows this morning the stock market is pulling back deeper into zone 1. The chart shows yesterday’s rally was not on heavy volume, indicating lack of conviction broadly among investors. In yesterday’s Morning Capsule, we provided you with stats and warned there was hidden weakness below the surface. Yesterday’s rally was almost exclusively due to aggressive momo crowd buying of AI stocks. After yesterday’s new high, momo gurus were sure that the stock market rally would continue today and were urging their followers to aggressively buy the new high. Prudent investors should note that momo gurus pretend to have a crystal ball and are always sure of what is going to happen next. Getting in the way of the momo crowd’s uber b
Treasury Auction Will Be The Test 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 new all time high yesterday and closed at an all time closing high. The chart shows that after going above the top band of zone 1 (resistance), yesterday the stock market pulled back to close near the top band of zone 1. The chart shows this morning the stock market is pulling back deeper into zone 1.
The chart shows yesterday’s rally was not on heavy volume, indicating lack of conviction broadly among investors. In yesterday’s Morning Capsule, we provided you with stats and warned there was hidden weakness below the surface. Yesterday’s rally was almost exclusively due to aggressive momo crowd buying of AI stocks. After yesterday’s new high, momo gurus were sure that the stock market rally would continue today and were urging their followers to aggressively buy the new high.
Prudent investors should note that momo gurus pretend to have a crystal ball and are always sure of what is going to happen next. Getting in the way of the momo crowd’s uber bullishness this morning is a global bond selloff. S. 719%, the highest level since 2002.
16% this morning, a rather sharp move. 91%. 48%. 5% to contain inflation.
Markets always have crosscurrents. The latest comments from Bank of Japan (BOJ) Governor Ueda are less hawkish than expected. S. markets.
Prudent investors should pay attention to today’s $39B 10 year Treasury auction and the stock market’s reaction. Expectations are that the auction will be well received. If expectations are met and the auction is good, yields could fall and the stock market could see buying. On the flip side, if there is a surprise and the auction is weak, it could cause the global bond selloff to continue and, in turn, become a headwind for the stock market.
FOMC minutes will be released at 2pm ET. In our analysis, yields have risen much higher than expectations after the last Fed meeting. FOMC minutes will be insightful, especially if it turns out that the Fed has been blindsided. Elon Musk plans for Space Exploration Technologies Corp (SPCX) to buy $40B worth of NVIDIA Corp (NVDA) chips.
How does Musk plan to pay for the chips? Of course, mostly by borrowing. This illustrates the heavy borrowing that is going on to build AI infrastructure on top of heavy borrowing by governments across the globe. Intel Corp (INTC) stock fell on rumors that Taiwan Semiconductor Mfg.
Co. Ltd. (TSM) and Musk were discussing a collaboration for Terafab. Currently, Intel is working with Terafab.
This morning, INTC stock is stabilizing. Yesterday, we shared with you the news from Advanced Micro Devices, Inc. (AMD) and Constellation Energy Corp (CEG). AMD and CEG were big gainers yesterday.
These two stocks ignited a rally in AI stocks yesterday. In the early trade today, stocks that saw major gains yesterday such as AMD and CEG are pulling back. 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 Inc (AAPL). com, Inc. (AMZN), Alphabet Inc Class C (GOOG), Meta Platforms Inc (META), Microsoft Corp (MSFT), Nvidia (NVDA), and Tesla Inc (TSLA). In the early trade, money flows are negative in S&P 500 ETF (SPY) and Invesco QQQ Trust Series 1 (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). 090M barrels vs. 019M barrels. Bitcoin Bitcoin (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. Most recently, we correctly called the rally from recent stock market lows and the 2026 semiconductor decline before a 25% drop in the Semiconductor ETF (SMH). In gold, we bought at an average price near $1,105, close to cycle lows, and took partial profits near $5,400, close to cycle highs.
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