YMAX

High Earnings Bar

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 is attempting to rally this morning.
• The chart shows SOXL remains below the low band of zone 3 (resistance).
• RSI on the chart continues to show divergence.
• Prudent investors should carefully watch to see if SOXL is able to break above the low band of zone 3.
• 36% of S&P 500 companies are reporting earnings this week.  Most notable are three Mag7 companies Microsoft Corp (MSFT), Meta Platforms Inc (META), and Amazon.com, Inc. (AMZN).
• The bar for earnings is very high.  In our analysis, in this earnings heavy week, it is worth repeating what we have been sharing with you – earnings growth is heavily concentrated and that represents a serious risk.  Prudent investors should note that only two companies NVIDIA Corp (NVDA) and Micron Technology Inc (MU) are responsible for 34% of earnings growth.  Only 10 companies are responsible for two thirds of earnings growth.
• In our analysis, availability of financing is likely to become a key constraint for AI going forward.  While large, investment grade companies will be able to raise money, smaller companies will have difficulty.  Jensen Huang of Nvidia and Hock Tan of Broadcom Inc (AVGO) have already echoed this sentiment.  Now, Elon Musk of Space Exploration Technologies Corp (SPCX) is piling in as he announced the largest ever financing for GPUs.  Musk said, "As of the past few weeks, debt markets have almost entirely shut off access to money for any company that doesn’t have substantial revenue independent of AI data centers. SpaceX closed $40B of debt for GPUs, but we’re investment grade and have Starlink & launch revenue. That means the 200+ neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many."
• As the race for financing AI continues, Meta is offering $53B of underwritten public offerings consisting of $22.5B of Class A common stock and $12.5B of depositary shares representing preferred stock.
• Anthropic has filed for IPO.  Anthropic will trade under the symbol ANT.
• Brazil is important as it is Latin America’s largest economy.  In a shocker, Lula has defeated Bolsonaro in Brazil.  Stocks in Brazil had been running up in anticipation of a Bolsonaro win.  After Lula’s win, stocks in Brazil are plunging.
• In our analysis, Lula’s win is not good for the U.S. as Lula has been drawing closer to China and working towards reducing the role of the dollar in international trade.
• The FOMC meeting will begin tomorrow.  The Fed will announce its rate decision on Wednesday at 2pm ET.
• There is a relief in the stock market this morning and oil is pulling back as the U.S. did not attack Iran over the weekend.  Starting Friday afternoon, rumors were running rampant that the U.S. and Israel would attack Iran over the weekend to gain a tactical surprise ahead of the midterm elections.

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), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are negative in Apple Inc (NASDAQ:AAPL) and Meta (NASDAQ:META).

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 (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. 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. Please click here to get our 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.