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Bulls Encouraged Please click here for a chart of SPDR Dow Jones Industrial Average ETF Trust (ARCA: DIA).
Note the following:
- The chart shows that the Dow Jones Industrial Average has gone straight up in the month of July.
- Strength is spreading from the magnificent seven to other large cap stocks in the Dow Jones Industrial Average. The magnificent seven stocks are Apple Inc (NASDAQ: AAPL), 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).
- The trendline on the chart shows that the slope is steep. Historically, such a steep slope is not sustained.
- RSI on the chart shows that the market is very overbought.
- In The Arora Report analysis, the primary reason for strength in the Dow Jones Industrial Average is not the macro or the fundamentals but a rush to buy the laggards in the stock market.
- Yesterday, we shared with you in the Morning Capsule:
To date, about 20% of S&P 500 companies have reported earnings. These earnings are down about 9% from the prior year. As earnings have fallen, the stock market has gone up on PE expansion.
- This morning, the story on earnings is better beyond tech stocks.
- General Motors Co (NYSE: GM) is raising its profit targets by at least $1B, and its second quarter earnings beat the consensus on pent up demand for large SUVs and pickups.
- General Electric Co (NYSE: GE) is raising its guidance, and second quarter earnings are better than the consensus as pent up demand for travel increases sales of jet engines.
- Paint maker Sherwin-Williams Co (NYSE: SHW) reported great earnings on strong demand for paint.
- The enthusiasm from a rally in the Chinese stock market is spilling over into the U.S. China is signaling stimulus to increase consumption and also for real estate.
- Investors are eagerly waiting for earnings from Microsoft Corp (NASDAQ: MSFT) and Alphabet Inc Class C (NASDAQ: GOOG) that will be released after the market close.
- The FOMC meeting is starting today. The Fed will announce its rate decision tomorrow.
- Historically, the momo crowd buys ahead of the Fed.
- Sentiment continues to be very positive, bordering on extreme but has not yet reached extreme. We previously shared with you:
Going into the critical week, sentiment is very positive, bordering on extreme. When sentiment reaches extremely positive, it is a contrary signal. In plain English it means time to sell. As a reminder, sentiment is not a precise timing indicator. In general, you want to buy when sentiment is extremely negative, and take profits when sentiment is extremely positive.
- The Conference Board's Consumer Confidence Index will be released at 10am ET and may be market moving. The consensus is 111.5.
- As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.
Momo Crowd And Smart Money In Stocks The momo crowd is buying stocks in the early trade. Smart money is inactive in the early trade.
Gold The momo crowd is inactive in the early trade. Smart money is inactive in the early trade.
For longer-term, please see gold and silver ratings.
Oil The momo crowd is inactive in the early trade. Smart money is inactive in the early trade.
For longer-term, please see oil ratings.
Bitcoin Bitcoin (CRYPTO: BTC) continues to trade below $30,000.
Markets Our very, very short-term early stock market indicator is neutral. This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.
Protection Band And What To Do Now It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding