Benzinga - by The Arora Report, Benzinga Contributor.
To gain an edge, this is what you need to know today.
Extremely Positive Please click here for a chart of SPDR S&P 500 ETF Trust (ARCA:SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- The chart shows that the stock market has reached the low band of the top resistance zone.
- RSI on the chart shows that as overbought as the stock market is, there is room for the stock market to run higher.
- The stock market always has a lot of crosscurrents. A new negative crosscurrent has developed. Sentiment has very quickly become extremely positive. As we have been sharing with you, at extremely positive, sentiment is a contrary indicator. In plain English, sentiment at extremely positive is a sell signal. Here are the key points:
- No one should act based only on sentiment.
- Sentiment is an important indicator but only one of the many indicators that go into a comprehensive 360 degree analysis.
- Sentiment is not a precise timing indicator.
- If the stock market pulls back, sentiment may also pull back, and thus negate any negative implications.
- Market mechanics continue to be on the positive side.
- Today is quadruple witching. In quadruple witching, stock index futures, futures options, stock options, and single stock futures expire.
- Quadruple witching can cause volatility.
- Over $5T notional value worth of options are expiring today.
- Related to options, depending upon how quadruple witching ends, there is a high probability of a market maker gamma squeeze. If a gamma squeeze starts, this market mechanic can take the market higher than you would think. To learn more about a market maker gamma squeeze, listen to the podcast titled “Market Mechanics: Impact Of Dealers’ Gamma Position Change On The Stock Market.” The podcast is available in Arora Ambassador Club.
- New York Fed President John Williams is trying to tactfully walk back Powell’s dovishness. So far, the stock market does not like what Williams has to say. Williams is also deemphasizing the dot plot. Williams says the rate cut question is not the main question before the Fed.
- The market is making many historic records.
- In a historic record, 44% of stocks in S&P 500 are overbought.
- In a historic record, small caps went from a new low to a new high in 48 calendar days.
- Due to the unprecedented nature of what is happening, be extra alert. The protection band may need to be changed quickly.
- As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band.
In the early trade, money flows are mixed in SPDR S&P 500 ETF Trust and Invesco QQQ Trust Series 1 (NASDAQ: QQQ).
Momo Crowd And Smart Money In Stocks The momo crowd is aggressively buying stocks in the early trade. Smart money is